Gold prices have dropped to a one-year low, falling below $4,000 per ounce after peaking near $5,600 in January. This decline comes despite ongoing global uncertainties, including the Iran War and a criminal probe into the Federal Reserve chair. Typically seen as a safe-haven asset, gold's recent performance has puzzled investors who expected it to rise amid such instability.
The drop in gold prices can be attributed to rising Treasury bond yields, which offer a more reliable way to make money. Jeff Guo, co-host of Planet Money, explained that gold doesn't earn income or interest on its own, making it less attractive compared to Treasury Inflation-Protected Securities (TIPS) bonds. While the Iran War has raised political instability, its primary effect has been increasing oil prices, which in turn has pushed interest rates up, making bonds more appealing relative to gold.