At the beginning of last week, the Gold price reached a new record high of $4,381 per troy ounce. Since last Tuesday, the price has fallen significantly again, but is still trading 50% higher than at the beginning of the year. The price increase occurred in two major waves: between January and the end of April, Gold recorded a gain of 25%. The price then stabilized at around $3,300 per troy ounce. The latest increase began at the end of August and peaked at almost 30%, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

Real interest rates are no longer the decisive driver

"In the past, the outlook for US real yields has proven to be an important driver of the Gold price. Since Gold does not yield interest but is considered 'risk-free', it primarily competes with other risk-free, interest-bearing investments, above all US government bonds. If interest rates in the US rise and thus (real) yields increase, the price of Gold usually falls as investments in the precious metal become less attractive. Conversely, if interest rates fall and/or inflation rises, real yields also fall, making Gold investments more attractive again."

"In recent years, up to around mid-2023, the development of the Gold price could be explained quite well by market expectations for US real yields. Since then, however, this relationship seems to have broken down. Real yields have risen significantly, which should have weighed on Gold. Instead, the precious metal has become noticeably more expensive. Since the beginning of September, real yields have fallen slightly again and the price of Gold has risen. However, the decline in yields was not nearly as sharp as to explain the extent of the rise in the price of Gold on its own. Other factors therefore seem to be driving demand for Gold."