Gold Bars Are Now Worth a Record $1 Million. Will Prices Keep Rising?
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In October, the price of gold yet again set a new all-time, propelling the cost of a single gold bar to over $1 million for the first time.
The precious metal hit $2,790.07 per troy ounce earlier this month, surging past the previous record. And with the average gold bar weighing 400 ounces, that now brings the value of an ingot to more than $1.1 million.
Why gold prices are rising
Historically, the price of gold is negatively correlated with interest rates. When rates are lower, gold prices tend to go higher.
That is one of the primary catalysts behind gold's latest record high, as the Federal Reserve is forecast to continue cutting its effective federal funds rate (EFFR) at each of the two remaining Federal Open Market Committee meetings this year, one each in November and December.
Another contributing factor to gold's all-time high price is increased volatility in the stock market. Although the major market indices have already recovered from the summer sell-off and subsequent pullback that began in late July, analysts expect turbulence to persist into the final months of 2024.
The Chicago Board Options Exchange's CBOE Volatility Index has been on the rise since Sept. 26, rising nearly 42% through the end of October. Gold, which has long been considered a safe-haven asset, benefits from negative investor sentiment in the equity markets, which is often fueled by volatility.
In other words, when investors are jittery about stocks, they tend to put more money into gold, which drives prices higher.
Gold's performance vs. stocks
So far this year, the premier precious metal has outperformed stocks. Despite the S&P 500 having gained a robust 21%, the price of gold has risen 38% in 2024. For context, this is the most dramatic rise in gold prices since the pandemic resulted in the metal gaining 25% between March 2020 and August 2020.
However, while the outlook for the stock market remains strong, pinning the price performance of gold is less precise. Stocks are expected to gain momentum heading into the final months of the year on the back of two additional expected rate cuts by the Fed.
Those very same rate cuts, in addition to other factors — including the U.S. presidential election, geopolitical unrest in the Middle East and Ukraine as well as ongoing fears of a recession — could fuel further gains for gold.
Always remember that gold is an alternative asset, and it is advisable to commit no more than 10% of your portfolio to the speculative investment.
