The metal has swung from record highs to steep drops and back again. Most of the people who trade it are still trying to figure out which move to trust. A shift in Federal Reserve expectations, paired with a fresh round of buying, is now pushing the rally question back to the front of the room.
Whether it holds depends on a handful of signals that are worth walking through one by one. Gold hit an all-time high of approximately $5,589 an ounce on January 28, then fell more than 18% from that record. Despite the pullback, the metal is still well above its 52-week low.
Gold posted its best week since January, gaining more than 7% as weaker-than-expected jobs data and tamer inflation readings reduced expectations for September's Federal Reserve rate hike. Gold stocks had already been trading at an elevated level. Both data points accelerated the rally, according to CNBC.
Related: Bank of America's latest gold outlook sends a different signal "Gold is the new gold," Pippa Malmgren, a former Special Assistant to President George W. Bush and member of the National Economic Council, told CNBC. What draws people into gold hasn't changed much in her view: worry over U.S. fiscal spending running loose, and weak growth almost everywhere else, which she thinks points toward more inflation.
Central banks haven't stopped adding to their gold reserves, and China is leading that charge. Something Malmgren reads as a sign that faith in fiat currency keeps eroding. "The PBOC added 19.9 tons in July, its largest month since late 2023 and its 21st straight month of accumulation," said Patrick Kennedy, who founded the Hartford, Connecticut firm AllSource Investment Management, according to Caixin Global.
China's streak has stretched well beyond a year at this point. John Paulson, the billionaire hedge fund manager who has bet on gold for more than a decade, thinks the metal is still only in the early innings of a longer rally. He points to fading trust in paper currency and government spending that shows no sign of slowing, according to CNBC.
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