The Blubber

The milestone was reached on Friday when the spot price of gold exceeded $2,500 per troy ounce. With gold bars typically weighing 400 troy ounces, a standard bar is now worth one million dollars.

Gold’s remarkable rise continued into the week, with spot prices hitting an all-time high of $2,531 per ounce on Tuesday. The precious metal, long regarded as a safe haven in times of economic uncertainty, has surged more than 20% this year.

So, what’s fueling the surge in gold prices?
The increase is tied to investor expectations that the Federal Reserve will soon cut interest rates. When rates fall, assets like bonds become less attractive, which can drive up the price of gold.

“The main factors behind the gold price surge are financial investment demand, particularly with improved ETF buying and overall positive sentiment, as the market anticipates a Fed easing cycle starting in September,” said Aakash Doshi, head of commodities for North America at Citi Research, according to Reuters.

Doshi predicts that gold could hit $2,600 per ounce by the end of the year, and possibly $3,000 per ounce by mid-2025.

Central banks have also been heavily purchasing gold. In 2022 and 2023, they bought over 1,000 tonnes of it — more than double their net purchases from 2021, according to the World Gold Council. China, in particular, was a major buyer, accounting for over 20% of these purchases as it sought to lessen its reliance on the US dollar.

While gold is at record highs, what about silver?
Even major U.S. retailers like Costco have gotten in on the gold rush. The big-box store started selling gold bars last year, and they could be generating up to $200 million in monthly revenue, according to a recent estimate.

For many investors, gold remains a reliable hedge against inflation, increasing in value even as the purchasing power of the dollar declines.