The price of gold has reached a historic milestone, surpassing $2,500 per troy ounce, pushing the value of a standard 400-troy-ounce gold bar to over $1 million for the first time ever. This surge is not fueled by a sudden surge in consumer demand for jewelry or investor appetite for this traditional safe haven asset. Instead, the rally is primarily driven by expectations surrounding the Federal Reserve’s monetary policy.
Gold prices have spiked 2.7% month-to-date as of August 20, following a strong 5.2% gain in July. The driving force behind this rise? Growing anticipation that the Federal Reserve will soon begin reducing interest rates. Investors are particularly focused on the upcoming Jackson Hole Symposium, scheduled for August 22-24, which is seen as a crucial event for gaining insights into the Fed’s future policy direction.
Currently, Fed futures suggest a 73.5% chance of a 25-basis-point rate cut in September. Markets are also anticipating a cumulative 82 basis points in cuts by the end of the year, indicating at least two more rate reductions in November and December. These expectations have fueled bullish sentiment surrounding gold.
Lower interest rates generally make non-yielding assets like gold more attractive, as they diminish the appeal of yield-bearing alternatives. Adding to the momentum, the U.S. dollar has experienced a significant decline, hitting new lows against a basket of major currencies in 2024. As the dollar weakens, gold—priced in dollars—becomes more affordable for foreign investors, further driving demand. The chart below illustrates the inverse relationship between the U.S. Dollar Index (represented by the green line and tracked by the Invesco DB USD Index Bullish Fund ETF UUP) and gold prices (depicted by the yellow line and tracked by the SPDR Gold Trust GLD).
Year-to-date, gold has surged by 22%, setting the stage for its best annual performance since 2020, when it gained 25%. If the current trend continues, 2024 could mark gold’s second-best year since 2008, when it soared by 29.6%.
While most gold bar transactions take place through authorized dealers, it’s becoming easier for individual investors to enter the market. Retail giants like Costco Wholesale Corp. (COST), Amazon.com Inc. (AMZN), and Walmart Inc. are also selling bullion, providing a more accessible entry point for consumers.
With a 400-troy-ounce gold bar now worth about $1 million, here’s what you could trade it for:
* 239,258 pounds of copper
* 17 Bitcoins (based on the latest Bitcoin BTC/USD price of $58,730)
* 21 Tesla Model Y vehicles
* 4 Ferrari Roma sports cars
* 7,852 shares of Nvidia Corporation (NVDA)
* 5,629 shares of Amazon Inc. (AMZN)
* 4,422 shares of Apple Inc. (AAPL)
* 2,375 shares of Microsoft Corp. (MSFT)
* 1,894 shares of Meta Platforms Inc. (META)
