Three Charts That Explain What’s Happening With Gold Prices USA

- Price of gold - - Closing above $4,000 - - Reaching heights it has never seen. - The price of gold hit $4,000 a troy ounce for the first time, the most ever. And this rally has been unusual compared to anything else we've seen at least since 1979. - When the going gets rough, people turn to gold. - Here are three charts to help explain what's happening. The first chart is the price of gold futures. Futures prices have risen some 50% this year, which has outpaced many of the biggest crises in American history. 

Investors pile into gold for a couple of reasons. First and foremost, it tends to retain its value. Then during times of inflation, when the dollar could depreciate over the course of time, gold can maintain some of investors' value when dollars are actually becoming weaker. And if you look at some of those previous run-ups, there were financial meltdowns that helped explain why investors flocked to gold. In 1979, for example, there was an inflationary shock. 

In 2020, obviously, the global pandemic really upended people's economic expectations. This time around, things are different. On the one hand, we have this AI craze stock market that's at records. On the other hand, there's a lot of concern about policy dysfunction in Washington. There's runaway deficits, there's a government shutdown, and there's apparent lack of concern of longer for higher inflation in the US economy. You can see this with President Trump's push for lower interest rates. So if you zoom into gold prices this year, they first ramped up in the first part of Trump's second term. Then something odd happened. There was a basic stagnation in the gold market over the course of the summer. 

Things settled down, until August. Federal Reserve Chair Jerome Powell gave a speech, essentially signaling that the Central Bank would begin cutting interest rates despite above target inflation. - The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. - Since then, gold prices have been off to the races. That brings us to chart two, which shows us how much central banks have added to their gold reserves. 

Central banks since the great financial crisis have really snapped up gold bullion, and they've done this in part because of a lot of doubts of the global financial system, which is really interwoven in many ways with the US economy, the US banks, and also the US Federal Reserve. So central banks around the world keep a variety of reserve assets on hand in order to shore up their financial systems. For decades, the most common reserve asset has been the US dollar, which is sort of the gold standard, pardon the pun, for some of these reserve assets. 

As we can see further into the chart, they're continuing to buy gold now, and many of the biggest banks on Wall Street believe that central banks will continue to buy gold next year, continuing to support gold prices. Our final chart looks at the performance of the US dollar over the past year. And as you can see, it hasn't been very strong. By one measure, the US dollar had its weakest first half in the last 50 years. Now, it's important to start by understanding that the Trump administration, in some respects, wants a weaker US dollar. 

A weaker US dollar helps US exporters send their products abroad. But at the same time, additional factors have been weighing down the value of the US dollar against other currencies. First and foremost is a lack of confidence in the outlook for the US economy. This really proliferated around the Liberation Day tariffs in April, where there's a lot of uncertainty about the outlook for the US economy and inflation. And more recently, after Trump's Big Beautiful Bill passed Congress, there's been mounting concerns about long-term deficits around the United States, and how the US government will finance them through debt. With any boom, there's oftentimes a bust to follow that. 

In 1979, for example, a lot of the real price gains in gold evaporated within the next couple of years. So even though we have prices in gold now going vertical, some investors are kind of tapping the brakes on this narrative. US institutions have held up before. So if they hold up now, if the Fed remains independent, if inflation does come down, if US growth is able to continue, that could be a negative downside pressure on gold prices.