Three related forces are propelling gold toward a record price: economic concerns, lower bond yields, and a weaker U.S. dollar. A boost in buying this year by central banks has added fuel to the rally. The tailwinds look likely to continue.

The price of gold settled at $2,041.30 an ounce on Thursday, the second-highest value in history and about half a percentage point below the August 2020 record of $2,069.40. The yellow metal has gained 13% since late February, before Silicon Valley Bank failed. Gold is up more than 25% since November. Other precious metals have rallied even more lately: The price of silver has surged nearly 30% in a month.

Gold prices are hot. At $2,023.70 an ounce—up 2.8% this past week—gold has about 2% to rise to hit its record high of $2,069.40, set in 2020. The yellow metal has gained 11% over the past month, and 24% from its recent November low, to flirt with the record.

Gold prices are typically driven by three factors. Gold is worth more in dollars when the greenback falls in value. Lower bond yields mean less competition for gold, which produces no income. And greater risk aversion makes gold more popular. Bond yields collapsed in March—the two-year U.S. Treasury note yield was at 3.8% on Tuesday, down from 5.1% at its early March peak. And bond yields abroad have held up better, weighing on the dollar.

Source: Barrons

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