Gold sees tight demand near record highs despite a risk-on environment, confirming again that the fundamental drivers behind gold have shifted. Since Trump reentered the White House, gold has rallied on both risk-on and risk-off days, and irrespective of whether US yields move up or down. Many investors now believe a $5’000/oz target for gold is plausible and might not be difficult to surpass. But there is a curious anomaly: volatility in gold is rising while the price is rising. That’s unusual — typically volatility compresses during sustained bullish trends and only spikes during panic selloffs. This divergence could suggest that risks to the gold rally are building beneath the surface. If a correction comes, history offers a cautionary precedent: in March 2022, gold’s volatility index reached similar levels, and the price of an ounce fell about 20% over the following four months. Not a guarantee of repetition, but worth keeping in mind.
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With love,
Ipek Ozkardeskaya