What's Behind Gold's All-Time Highs

Over the past two decades, the price of gold has undergone a turbulent journey amid the acceleration of globalization, continuous fluctuations in financial markets, and changes in geopolitical situations. This article systematically reviews the evolution of gold prices from 2000 to 2024, highlights major events influencing gold prices, and discusses their impact on the gold market.

Overall, from the perspective of the global situation, these two decades can be broadly divided into five stages:

During this stage, the global situation was relatively stable, with major focuses on the process of globalization, technological developments, and some local conflicts. However, there were still geopolitical tensions in certain regions, such as conflicts in the Middle East.

The global financial crisis that erupted in 2008 was the major event of this period. The crisis led to economic recession and financial market turmoil worldwide, prompting many countries to implement stimulus policies to address the crisis. Geopolitical situations during this period were relatively minor, with global economic recovery becoming the primary focus.

During this period, geopolitical tensions escalated noticeably. Events such as the Arab Spring, the Ukraine crisis, and the Syrian Civil War occurred, triggering regional conflicts and global political turmoil, exerting a certain degree of influence on the global economy.

During this stage, global trade tensions escalated significantly, particularly reflected in the escalation of the U.S.-China trade war and the uncertainty surrounding Brexit. These events brought uncertainty to global economic growth and international trade, becoming the focus of global affairs.

The outbreak of the COVID-19 pandemic in 2020 became the focus of global attention. The pandemic resulted in economic recession, increased pressure on healthcare systems, and social unrest worldwide. Global governments implemented various measures to address the pandemic, including lockdowns, stimulus plans, and vaccination efforts.

While from the perspective of changes in gold prices, it can be roughly divided into four stages:

In the early 2000s, gold prices were relatively subdued, but as global economic instability increased, particularly after the 9/11 attacks, demand for safe-haven assets surged, causing gold prices to rise and reach historic highs. This period saw a steady climb in gold prices, setting multiple historical records.

Starting in 2011, gold prices peaked and then began to decline, entering a period of adjustment. As the global economy gradually recovered, demand for safe-haven assets decreased in the market, and some investors began to shift funds from gold to other assets, leading to a downward trend in gold prices. In addition, the Fed's implementation of quantitative easing policies eased the pressure of economic recession, reducing demand for gold as a safe-haven asset. During this time, gold prices experienced some degree of volatility and adjustment.

Since 2016, gold prices have once again begun to rise. Factors such as escalating geopolitical tensions, concerns over global economic slowdown, and the proliferation of negative interest rate policies have driven investors' demand for gold as a safe haven, thereby pushing gold prices upward.

Although gold has recently shown strong performance, continuously hitting historical highs, there was a period of nearly three years where gold fluctuated widely between $2,069 and $1,671, with a noticeable upward trend only emerging in early 2024. Therefore, in the broader cycle, gold has been in a turbulent phase during this time.

The outbreak of the COVID-19 pandemic led to global economic recession and financial market turmoil. During this period, demand for safe-haven assets increased again, driving gold prices higher. However, in the post-pandemic era, a series of "thorny" issues (such as soaring inflation, countries starting interest rate hike cycles, etc.) have emerged, causing fluctuations in the trajectory of gold prices due to the impact of economic recovery processes and other factors.

The stage division is primarily based on the long-term trend of spot gold prices and the influence of significant events. Nonetheless, the exact periods and trends of each stage may vary due to market factors.

In 2000, there was a significant peak in spot gold prices. The bursting of the dot-com bubble led to a sharp decline in the stock market, increasing global economic uncertainty and prompting investors to seek safe-haven assets. Gold, as one of the traditional safe-haven assets, gained favor among investors. Additionally, some central banks began considering tightening monetary policy to prevent inflation as a response to the effects of the dot-com bubble burst. This expectation made physical assets like gold more attractive, leading investors to shift towards gold and driving its price up.

As the economic recession caused by the dot-com bubble burst gradually eased, signs of economic recovery increased. The stock market began to rebound. The U.S. economy also gradually emerged from the recession in early 2000, with accelerated GDP growth and improvements in the job market, alleviating market concerns about economic prospects and reducing excessive demand for safe-haven assets, including gold. This led to a high-level retracement in gold prices.

In early 2001, the international gold price fell to $255.95 per ounce. This phase is also referred to as the "20-year bear market" of international gold. Until the occurrence of the 9/11 attacks, which triggered severe turmoil in the global economy and financial markets, becoming a "springboard" for gold's rise. Following this event, gold opened with a gap up, rising 3% on the day, and continued to rise for several days, reaching close to $300. The further intensification of geopolitical risks associated with terrorism following this event, such as the US-led invasion of Afghanistan on October 7, further strengthened investors' demand for safe-haven assets, supporting the rise in gold prices. After the 9/11 terrorist attacks, the hedging and safe-haven functions of gold regained international attention, marking the end of a 20-year bear market of gold and the beginning of an upward trend.

In 2002, the entire financial market remained shrouded in the "fog" of the aftermath of the 9/11 attacks. Global economic uncertainty remained high, leading to lingering investor concerns about economic prospects. Furthermore, geopolitical tensions continued to escalate, with the U.S. continuing its anti-terrorism efforts in Afghanistan and other regions, exacerbating geopolitical uncertainty. Meanwhile, the U.S. dollar faced some depreciation pressure, partly due to uncertainty in the US economy and the accommodative monetary policy adopted by the Fed, further supporting the upward trend in gold prices.

In 2003, the Iraq war broke out, an event that triggered geopolitical tensions on a global scale and increased uncertainty in the global economy. Concerns about the outcome of the war and the ensuing situation, as well as fears of disruptions in the supply of oil, exacerbated the market's safe-haven demand for gold. During the Iraq war, the expansion of the U.S. fiscal deficit and the easing policy adopted by the Federal Reserve put pressure on the USD, which indirectly provided upward momentum for the rise of gold.

In 2004, although the war in Iraq had ended, the geopolitical situation remained unstable in the Middle East and some other regions, such as the conflict between Palestine and Israel. The fiscal deficit of the U.S. Government had continued to expand, and the Fed had continued to implement an accommodative monetary policy. Global economic growth was weak, and some regions were even facing the pressure of recession, triggering concerns about the prospects for global economic growth. Against this background, gold continued to move up.

In 2005, the conflict between Iraq and Afghanistan continued, and the Iranian nuclear issue made the geopolitical conflict situation worse, which greatly increased the uncertainty of geopolitical conflict. The global economy had recovered to a certain extent, but there were still many uncertain factors, such as high oil prices, inflationary pressures, and global trade imbalances, which made financial markets begin to worry about the global economic prospects. Gold continued to rise.

In 2006, the "chaos" in the Middle East continued. In the fourth year of the Iraq war, armed conflict broke out between Israel and Lebanon. In addition, the international community was increasingly worried about Iran's nuclear program. Iran insisted on the right to develop nuclear technology, while Western countries had imposed severe sanctions on it. North Korea conducted its first nuclear test, which led to the adoption of sanctions resolutions by the UN Security Council. The natural gas price dispute between Russia and Ukraine led to a serious crisis, which interrupted the energy supply of many European countries. The "subprime mortgage crisis" in the U.S. began to take shape.

In 2007, geopolitical tensions persisted in the Middle East, the ongoing Iraq war, the long-standing Iranian nuclear issue, the Palestinian-Israeli conflict, etc., which made the market always shrouded in anxiety. In addition, the "subprime mortgage crisis" officially broke out, sweeping the world's major financial markets such as the U.S., the EU and Japan in August. In the same month, the Fed responded by injecting liquidity into the financial system to increase market confidence, and the U.S. stock market was also maintained at a high level so that the "subprime mortgage crisis" was temporarily controlled without further deterioration, but it was only an effort to temporarily control it. The international crude oil price rose to a historical high again, exceeding US$100 per barrel, and the inflationary pressure increased dramatically. Under the main focus of hedging and "avoiding" inflation, gold began to rise, once exceeding US$800/ounce, but because the USD was also the market's choice at that time, the gold's rise was somewhat limited.

In August 2008, the share prices of Fannie Mae and Freddie Mac, the two giants of American mortgage loans, plummeted, and financial institutions holding Fannie Mae and Freddie Mac bonds suffered large losses. The U.S. Department of the Treasury and Federal Reserve were forced to take over Fannie Mae and Freddie Mac, and the "subprime mortgage crisis" began to deteriorate sharply and went out of control. In September, Lehman Brothers, the fourth largest investment bank in the U.S., declared bankruptcy, and the "subprime mortgage crisis" was completely triggered, which spread all over the world and evolved into a global financial crisis. The financial markets plunged, many banks closed down, the credit market froze, and the global economy fell into a serious recession. In response to this crisis, mainstream central banks had started QE (the Federal Reserve started QE1). In addition, the international crude oil price soared to a historical high again, reaching nearly US$150 per barrel. Driven by the global financial crisis, the financial market crash and the soaring crude oil price, the highest price of gold exceeded US$1,000 per ounce.

In 2009, the global economy was still shrouded in the follow-up influence of the financial crisis, the economic recession continued to be staged in many countries, and the financial market was still unstable. At the same time, the war in Afghanistan had entered the bloodiest and most complicated year, with the intensification of conflicts between armed groups such as the Taliban and the Afghan Government and foreign forces. In September of the same year, a debt crisis broke out in Greece, which signaled the beginning of the "European debt crisis". In December, the three major rating agencies downgraded Greece's sovereign rating, and the Greek debt crisis intensified. However, it was widely believed that the Greek economy scale was small and its influence would not expand. Gold ushered in a high point in the first half of the year. In the second half of the year, due to the signs of recovery in the world economy, the safe-haven demand for gold was weakened, and the price fell from the highs.

At the beginning of 2010, the "European debt crisis" began to spread, and European countries such as Ireland, Portugal, Spain, and Germany faced serious financial difficulties. Greece was no longer the "protagonist" of the crisis, and the whole EU was affected. At this point, the "European debt crisis" had been completely exposed to the public, which had aroused concerns about the stability of the eurozone. In November of the same year, the Fed started the second round of quantitative easing (QE2). In December, the self-immolation incident in Tunisia became the trigger for the subsequent "Arab Spring". The price of gold broke through US$1,400 per ounce during the year, with the rally mainly concentrated in the first half of the year.

In early 2011, a series of protests and political upheavals erupted in North Africa and the Middle East, officially kicking off the Arab Spring. It began in Tunisia and later spread to Egypt, Libya, Syria, Yemen, and other countries, leaving the Arab world "in warfare shambles". The most famous event was the fall of Gaddafi. At the same time, the "European debt crisis" had intensified, Greek debt had once again fallen into crisis, and the Italian debt problem had become the core concern of the market. European governments had implemented fiscal austerity policies, cut spending, raised taxes, and carried out structural reforms. The global economic uncertainty had increased, including the recovery process of the U.S. economy, the slowdown of China's economic growth and the instability of the global trade environment. Gold exceeded US$1,900 this year. At the same time, the last cycle of gold in the past 10 years ended and began to enter the adjustment period.

In 2012, the impact of the "European debt crisis" reached its peak, with frequent "chaos" in EU countries, widening debt spreads, soaring government bond yields, and falling stock markets, which severely impacted the financial markets inside and outside the eurozone. The European Central Bank (ECB), in response to the crisis, officially launched the European Stability Mechanism (ESM), replacing the previous European Financial Stability Facility (EFSF). In the same year, the Fed kicked off the third round of quantitative easing (QE3). In terms of geographic conflicts, the civil war in Syria had intensified, with the conflict between government forces and the opposition escalating. The Israeli-Palestinian conflict had also intensified, and the Middle East had been in turmoil over the Iranian nuclear issue, the internal turmoil in Iraq, and the war in Afghanistan. Although risk aversion remained the main driving force of gold, due to the actions of the ECB to alleviate the panic caused by the "European debt crisis" and the remarkable increase in gold in previous years, investors "took profits" in the middle of the year, which kept gold from rising as much as it had before, with the final high resting at around US$1,800.

In 2013, the "European debt crisis" came to an end. The overthrow of Egyptian President Mohamed Morsi by the military as a result of protests was a landmark event of the Arab Spring and an important turning point for the movement. In addition, the U.S. government shut down as Congress failed to agree on a budget. At the end of the year, the Federal Reserve announced the gradual withdrawal of its quantitative easing policy. Overall, the global financial markets in general showed signs of recovery and stabilization, but the gold price fell sharply, by the end of the year had fallen to about $ 1,200, retraced the vast majority of gains of the decade, and was the first annual decline in the gold price since 2000. Some market participants began to expect the end of the gold's bull cycle.

In 2014, the "Crimea" incident broke out, the U.S. began to impose sanctions on Russia. However, the impact of this event on gold was limited. Some of the major economies showed signs of recovery, especially the U.S. and Europe, and the strong performance of the stock market caused investors to turn to risky assets. Geopolitical tensions were relatively calm. Although tensions remained in some areas, overall geopolitical risks were reduced. In addition, the dollar began to appreciate. Overall, the performance of the gold market in 2014 was affected by the appreciation of the dollar, signs of a global economic recovery, and the weakening of geopolitical tensions, which led to an overall weakening.

In 2015, British Prime Minister David Cameron advanced the referendum plan, saying that "the referendum must be held before the end of 2017". In addition, the U.S. economy continued to recover and the market began to expect that the Federal Reserve might raise interest rates, an expectation that made the dollar appreciate. In December, the Federal Reserve raised interest rates by 25 basis points, which was the first rate hike cycle since the financial crisis. In addition, China's stock market collapsed with a sharp decline, triggering turmoil in global stock markets. The continuing civil war in Syria and the rise of ISIS further complicated the regional situation. The gold market was affected by various factors in 2015, with high market volatility. While some factors drove investor demand for safe-haven assets, other factors such as the expectation of a Fed rate hike and dollar appreciation also exerted pressure on the gold price.

In 2016, the Brexit referendum officially began, with the result of the unexpected 51.9% of the vote in favor of leaving the European Union. This result is completely beyond mainstream expectations, triggering a huge shock in the financial markets. In November, Trump was officially elected President of the U.S., and some of his comments and policy ideas during the campaign triggered market concerns. He has repeatedly tweeted comments on the U.S. economy, monetary policy, and the financial markets, so that the global financial markets are often "briefly" out of order, and gold risk aversion was frequent. In December, the Federal Reserve raised interest rates for the second time by 25 basis points. This year's overall performance of the gold price is solid, which showed an upward trend, with a high of around $ 1370, ending three consecutive years of annual declines. It also meant that gold's adjustment period had ended.

In 2017, shortly after Trump took office, he announced that the U.S. withdrew from the TPP agreement, which opened the prelude of the U.S. "withdrawal". The Sino-US trade war was to start. The Federal Reserve raised interest rates three times in a row (25 basis points each time) and completed the exit from QE by the end of the year. North Korea's repeated missile test launches and nuclear tests have strained the situation on the Korean Peninsula. The struggle for regional influence between Iran and Saudi Arabia in the Middle East continued to intensify, leading to heightened geopolitical tensions in regions, such as Syria, Iraq, and Yemen. Due to the impact of the British referendum, Italy broke out the "Catalonia" event. The gold market recorded annual gains under the influence of Fed policy expectations, political uncertainty in the U.S., and the geographic situation. The gold price was once again in an uptrend.

In 2018, the Federal Reserve continued to implement policies of interest rate hikes and balance sheet shrinkage. The U.S. imposed steel and aluminum tariffs on China, and the Sino-U.S. trade war was officially launched, with the two countries imposing tariffs on each other, leading to a tense global trade environment. In addition, the passage of the Trump tax reform bill, which was one of his key political achievements, had a relatively profound impact on the U.S. economy and stock market. In the second half of the year, under the impact of the Sino-U.S. trade war, uncertainty about the global economic growth outlook increased sharply, and the stock market equities of various countries suffered major shocks and adjustments, triggering concerns about a global economic slowdown. The gold price closed narrowly lower during the year under the influence of increased uncertainty in the global economy and Fed policy adjustments.

In 2019, although the Sino-US trade war eased, there was still friction, and the uncertainty of the trade negotiations continued to weigh on the market. In September, there was an anomaly in the U.S. repo market, the SOFR rate (which can be interpreted as the repo rate), replacing the LIBOR rate, appeared to soar sharply, exceeding 5% and even surging to 10%. At that time, the federal benchmark interest rate was only 2%-2.5%. The Federal Reserve bailed out the market by injecting $90 billion into the repo market, while it announced a 25bp interest rate cut on the 18th, stopped reducing the balance sheet, and even gave a hint of the possible expansion of the balance sheet (it indeed did so by repurchasing $60 billion a month from October 15). This was called "QE4", and the market began to see a "dollar shortage". In December of the same year, the COVID-19 pandemic began to emerge. The gold price rose against this backdrop, reaching a high of about $1557.

At the beginning of 2020, the COVID-19 pandemic broke out globally, representing a global public health crisis. Many countries implemented lockdown measures, leading to supply chain disruptions, skyrocketing raw material prices, plummeting commodity demand, labor shortages, and many other problems. The global economy suffered a severe setback, with multiple countries and regions experiencing a recession. Central banks around the world responded to the crisis by cutting interest rates. Some central banks even made two consecutive rate cuts in March. Governments also initiated fiscal stimulus plans. For example, the United States' fiscal deficit reached a staggering $3.4 trillion in FY2020, accounting for 15% of GDP.

In March, certain hedge funds' bond basis trade and risk parity strategies "failed", resulting in a financial "black hole." Due to leverage effects, the impact spread from the stock market to the bond market, from oil to gold, and even to the commodity markets, with no market being spared. The U.S. economy experienced a series of severe internal disruptions. As a result, the money market lost almost all liquidity. The bond market was on the verge of being crushed. Overseas U.S. dollar liquidity "channels" were almost all cut off, trapping the U.S. dollar within the U.S. market and causing an "acute dollar shortage" worldwide. The Federal Reserve intervened by injecting a massive $1.5 trillion into the market to fill the funding "black hole" and restore U.S. dollar liquidity. Gold soared during this period on safe-haven sentiment and central banks' loose monetary policies, reaching historical highs with its peak at $2070 or so. Then gold's upward trajectory came to an end, and it entered a period of volatility.

In 2021, the COVID-19 pandemic continued to rage globally, accompanied by the emergence of new variants. The problems caused by the pandemic remained severe, though slightly easing. The global economy showed signs of recovery, but the progress was slow and uneven. The subsequent effects of the pandemic began to manifest, with inflation rates rising in many countries, indicating the initial signs of global inflation. Major central banks such as the Federal Reserve maintained loose monetary policies to stimulate the economy. Friction between Russia and Ukraine escalated in the eastern Ukrainian region. Despite attempts by both sides to resolve their disagreements through diplomatic means, tensions persisted. Gold gained upward momentum mainly in the period from March to May that year, rising along with the U.S. dollar to around $1960, followed by a decline.

In February 2022, tensions between Russia and Ukraine escalated, and on the 24th, the Russia-Ukraine war officially broke out. Besides the ongoing supply chain disruptions and other problems caused by the pandemic, the Russia-Ukraine war also fueled energy prices. At the same time, inflation problems became increasingly severe in the post-pandemic era, with a rapid surge in global inflation. In response to inflation, the Federal Reserve raised interest rates by 25 basis points in March, marking the start of this interest rate hike cycle. Various countries followed suit, and the global central banks started to hike interest rates. Financial markets were driven by rate-hike expectations in 2022. Although gold hit new highs again in 2022, its uptrend was limited to the first quarter, followed by a prolonged decline until a strong rally in November prevented gold from closing the year too low.

In 2023, the global disinflation action continued at full speed, with interest rate hikes implemented throughout the year. Although supply chain disruptions improved significantly, several problems arising from the pandemic began to "evolve" and spread, such as labor market tightness, services inflation resulting from a shift in consumer preferences from goods to services, and energy inflation caused by the Russia-Ukraine war. By mid-year, the market began to anticipate interest rate cuts. In October, the Israeli-Palestinian conflict erupted. In December, the Federal Reserve signaled a rate cut. Gold started its second strong rally of the year and reached new highs during this uptrend. It can be said that this rally was the key to gold's annual gains in 2023.

From 2024 onwards, trading has been driven by "rate-cut expectations". After achieving impressive results in disinflation in 2023, the progress seemed to stagnate in 2024, with increasing attention on inflation stickiness. Central banks worldwide appeared to lean towards price stability amid their dual mandates. Expectations of interest rate cuts have been dampened since the beginning of the year. After experiencing fluctuations in January and February, gold began to rise in March, surging exceptionally at the end of March, successively breaking through the levels of $2200, $2300, and $2400. The market and Wall Street have different interpretations of this. No matter what, gold has had a good start so far in 2024.