Gold Prices Soar on Economic Uncertainty and Weakening Dollar

The price of gold has been rising rapidly over the past two years, causing sticker shock for those looking to purchase it as an investment. To understand this trend, FactSet analyzed the performance of various sectors within the gold industry, including public and private mining, futures trading, and a custom basket of private funds.

Using the price of gold futures as a reference point, researchers found that it remained relatively stable from 2012 to 2023, with prices staying within 30% of its benchmark value in 2012. The gold mining and futures prices showed a significant correlation, moving in lockstep during this period.

However, from 2023 onwards, the price of gold began to increase sharply, driven by factors such as economic uncertainty, inflation, and a weakening US dollar. This led to increased central bank purchases, which further fueled the rise in gold prices. Gold mining followed suit, with its price increasing in tandem.

The private portfolio of funds showed steady increases in net investment over the sample period, but its response to the recent surge in public market value was more muted than expected. This could indicate that private markets are choosing to wait and see how things unfold before making further investments.