Posthaste: The mystery of gold prices just got more mysterious

Is it time to cash in your bullion? Maybe

Predicting the price of gold is notoriously difficult — mainly because it is driven by many diverse and sometimes mysterious forces.

Lately though it has become even more of an enigma as the yellow metal is apparently breaking all the rules.

Since 2020, gold is up more than 50 per cent, making it one of the best-performing asset classes on the market, said  Marc-Antoine Dumont, senior economist for Fédération des caisses Desjardins du Québec.  On July 1, 2019, gold was at US$1,426. Today it is at US$2,338.

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“There is no obvious reason for gold prices to be gaining so much ground,” Dumont wrote in a recent report that looks at this puzzle.

Not even the usual suspects explain it.

Sure, gold is seen as an investing safe haven and does well in uncertain times — and we’ve certainly had plenty of those over the past four years. Dumont said gold hit records in 2020, 2022 and 2024 and each time there were exceptional circumstances driving investors to safety — the pandemic, Ukraine war, soaring inflation and conflict in the Middle East.

Lately though the risks of recession or stock market correction have lessened, and yet the price continues to rise.

“The price of gold is clearly benefiting from this uncertainty, but that can’t fully explain the impressive gains we’ve observed,” said Dumont.

Central banks’ appetite, especially in emerging economies, has swelled from 14 per cent of total global gold demand in 2019 to 23 per cent in 2023, but this just reinforces a trend that began after the 2008 financial crisis, said Dumont.

And during that same time period, investment demand has shrunk from 30 per cent to 21 per cent.

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Not even long-time indicators are proving reliable. For example, when inflation goes up, so does gold as investors buy bullion as a hedge. But now as price pressures start to ease around the world, gold is still climbing.

Another indicator — bond yields adjusted for inflation — also appears out of whack, said Dumont.

Historically when yields on U.S. 10-year Treasury inflation-protected securities go up, gold prices go down. So in 2022, when real yields increased amid tighter monetary policy and slower economic conditions, gold prices should have gone down.

“Instead, they bucked their historical trend and rose when they should have fallen. That meant that the decades‑long inverse relationship between gold prices and these yields was shifting,” said Dumont.  “And even more recently, gold prices and the 10‑year TIPS yield both went up, suggesting that the relationship has broken down.”

The American dollar also generally shares an inverse relationship with gold, but “now, the greenback value is riding high … and at the same time, the price of gold has been soaring.”

Dumont concludes that there is no obvious reason why gold has gained so much ground.

But hey, we live in unusual times.

“Look at the economic and financial conditions present worldwide, as well as the broader geopolitical climate. We’ve gone through a pandemic, the highest inflation in 50 years, slight de‑globalization, spiking interest rates, the energy crisis and the first war on European soil in 30 years — to name just a few of the events that drove the price of gold higher.”

“These price shifts can’t be fully explained by the usual fundamentals, and there is no clear answer to why the price of gold has taken off so spectacularly,” said Dumont.

So how to predict the future?

Despite all that uncertainty, Desjardins believes that gold at US$2,300 is overvalued and due for a slight correction. The recent boom in mining will also increase supply over the next few years and weigh on prices.

Once inflation settles closer to central bank targets and interest rates come down, gold should head lower, though bank buying and global uncertainty will put a floor under any declines.

That will put gold prices, Desjardins predicts, at US$2,100 per ounce for 2024 and US$1,900 for 2025.

So what do you think, time to sell?


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Canadian retail sales picked up a bit in April, but not in Ontario.

Canada’s sales grew 0.7 per cent, ending three straight months of decline. They were up in eight provinces, led by a 3.1 per cent gain in Alberta. But in Ontario sales fell 1 per cent, the fourth decline in a row and largest drop since May 2023.

Toronto sales were even worse, falling 2.5 per cent. So far this year retail sales in Canada’s biggest city are down 3.9 per cent, compared to the 0.2 per cent decline nationally, say National Bank economists.

Look for further declines in May, with Statistics Canada forecasting a 0.6 per cent drop nationally. That would almost wipe out all of April’s gains, suggesting a weakness that should keep more Bank of Canada rate cuts on the table.


  • Bank of Canada governor Tiff Macklem will give a speech on Monday to the Winnipeg Chamber of Commerce.
  • Natural Resources Minister Jonathan Wilkinson will participate in a fireside chat with the Greater Kitchener Waterloo Chamber of Commerce.
  • The Alberta Energy Regulator releases the Alberta Energy Outlook report for 2024.



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    Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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