Gold prices took a step back from their recent record highs on Monday, as traders paused following a significant rally. The price of gold, which had reached an all-time high of $2,152.30 per ounce overnight, was trading at around $2,086.
The surge in gold prices has been fueled by lower bond yields, which have reduced the competition for the precious metal. Unlike bonds, gold does not generate any income.
The recent reports of attacks on shipping in the Red Sea have also contributed to an increase in risk aversion and a higher demand for safe-haven assets. However, some analysts express skepticism about the sustainability of gold’s upward trajectory.
In a research note, Julius Baer analyst Carsten Menke wrote, “An economic environment characterized by the absence of a recession and above-average interest rates will likely deter safe-haven seekers from returning to the gold market in the foreseeable future. We believe that the gold market may have gotten ahead of itself and therefore advise against chasing this rally.”
While the current softening in Treasury yields has made the opportunity cost of holding non-yielding assets like gold decrease, it remains to be seen whether the demand and prices will continue moving in the same direction.