Gold prices are now hovering around $2,000 per ounce, which is around the all-time highs. What makes it unusual is that gold is at these levels despite a very significant increase in real interest rates in the United States over 2022 and 2023, according to Schroders.
Before 2008, gold traded more on its commodity characteristics (including jewelry demand and with emerging markets currencies) and less in line with real interest rates. The real pivot point was that following the 2008 global financial crisis, a broad policy response of quantitative easing was introduced, which in effect just meant printing money to buy more government bonds to suppress interest rates.
From an investor perspective, this change raised concerns about long-run monetary debasement and caused a strong underlying bid for gold because of its monetary characteristics.
For nearly 15 years, the relationship between gold and real returns on bonds was strong. They remained happy bedfellows from