Gold is glittering again - but that’s not necessarily good news

August 12, 2026 — 11:58am

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After a near-six-month hiatus, the gold price has suddenly surged again. That’s probably not an encouraging sign of things to come.

The price peaked, at record levels, above $US5300 ($7500) an ounce just ahead of the start of the war in the Middle East at the end of February. It then steadily reversed course, falling below $US4000 an ounce last month, before surging again to trade above $4400 an ounce this week. In just over a week it has climbed more than 8 per cent.

There were obvious catalysts for the movements in both directions.

The United States and Israel’s attack on Iran, which sent oil prices soaring and raised expectations of inflation, punctured gold’s record run.

The US Federal Reserve Board’s decision to leave its policy rate unchanged at last month’s meeting, and the inability of its new chair Kevin Warsh to dispel concerns that he will do Donald Trump’s bidding, has been a significant influence over the metal’s recent resurgence.

Last year’s gold rush was ignited by a speech given by Warsh’s predecessor, Jerome Powell, at the annual economic talkfest at Jackson Hole in Wyoming, where he signalled the start of an interest rate easing cycle that the Fed followed up with three rate cuts.

If investors fear that America’s finances might corrupt its monetary policies, the gold market looks like the obvious – perhaps the only – place to shelter.

The Fed seemed to be shifting its focus from inflation to protecting growth. Gold’s key appeal is that it provides a hedge against inflation, so that apparent shift in priorities set its market alight.

There’s an inverse relationship between the gold price and interest rates. Lower rates – because gold generates no income but has holding and opportunity costs – are positive for the price.

The price has been aided by last week’s weak US jobs data, which blunted the market’s expectations of a........

© The Age