#MacroFriday: Golden Lining to Uncertainty

After a staggering 30% price increase in 2024, gold has continued its upward trajectory, reaching a new record high.

On Wednesday, gold hit $2,882 per ounce, driven by escalating fears of a trade war under Trump's presidency. This safe-haven asset has been on a long-term rise, defying historical trends. Typically, rising real interest rates act as a headwind for gold. However, despite U.S. real rates increasing from below 0% in 2022 to over 2% today, gold has soared.

A major driver of gold's rally in 2024 was demand from global central banks, particularly in emerging markets. This trend is rooted in geopolitical concerns. The West weaponized its currencies in 2022 through SWIFT bans and asset seizuresagainst Russia, prompting emerging market central banks to seek alternatives for its reserves. Meanwhile, economic uncertainties in China and India led to higher demand for gold among citizens. Interestingly, the gold positions of ETFs holding physical gold declined during this period, highlighting a divergence between investors and physical demand. Asmacro-economic uncertainties persist on multiple fronts, gold continues to offer a golden lining for investors.