Gold Hits A Record High

By Nicholas Jasinski |  Thursday, July 23

Golden Glow. Investors spent the morning today processing a large volume of news. Quarterly earnings, economic data, congressional negotiations, and geopolitics all combined to produce a flood of headlines. The market didn't seem to know how to react, and major indexes hovered just under the break-even line.

By the early afternoon, however, the bears seemed to have won out. A tech stock-led decline pulled indexes solidly into the red. Big Tech firms took the brunt of the selling: Apple stock lost 4.6%, Amazon.com fell 3.7%, and Microsoft closed down 4.4% following its earnings release on Wednesday evening. 

But the selling was broader than just tech, and the S&P 500 closed down 1.2%—its worst day this month. The Dow Jones Industrial Average lost 1.3%. The Nasdaq Composite closed down 2.3%, and the S&P 500  technology sector lost 2.6%.

Although tech has lagged the rest of the market on several days recently, it's still by far the best-performing sector this year, rising 19.3%. Runner-up consumer discretionary has climbed 9.5%. Worst-off energy shares are down 37%.

Elsewhere in the markets today, the price of gold settled at an all-time high: up 1.3%, to $1,889.10 an ounce. The safe-haven metal has been on a tear, up almost 34% over the past 12 months.

Gold began its rise last year, when the Federal Reserve started cutting interest rates. The rally intensified in 2020 as investors’ flight to safety during the pandemic boosted gold and other haven assets. After retreating slightly from its mid-April highs, gold has rallied again in recent weeks. A weaker U.S. dollar and continued uncertainty about the future have helped it appreciate further.

Going forward, the conditions that have boosted gold remain in place.

Here's what Helima Croft, RBC Capital Markets' head of global commodity strategy, wrote in a report today:

The level of uncertainty (which we think is the biggest driver), low and negative real and nominal rates, politics and geopolitics, etc. have driven gold prices sharply higher, and pushed allocations among investors ever higher, putting total holdings at ever clearer record highs. The recent move will continue to have legs under it as long as Covid-19 and the economic uncertainty it causes drags on, leaving holdings and interest sticky for the foreseeable future in our view.

So $2,000-an-ounce gold might not be far off. But even that wouldn't be gold's highest real value ever.

Adjusted for inflation, gold's settlement price of $825.50 on Jan. 21, 1980 becomes $2,722.18 today, according to Dow Jones Market Data. That's still a ways away.