The new gold rush, the value “that we keep when everything is shaky”

Economist John Maynard Keynes once called it a “barbaric relic,” an ancient metal with little relevance in the modern world. When the international monetary system based on gold ended in the early 1970s, central banks began selling their reserves—and continued to do so for decades.

For the world's financial leaders, gold, which has served as a store of value since the first ingots were minted in Mesopotamia millennia ago, seemed doomed to oblivion.

And yet, the precious metal is now making a spectacular comeback, even among the most cautious investors. Recently released data show that gold surpassed the euro last year to become the second-largest reserve asset for central banks. In these politically volatile times, gold has once again become an anchor.

Donald Trump's trade war, rising geopolitical tensions, and questions about the dollar's long-term role have fueled the yellow metal's spectacular surge. The price of gold reached a new all-time high in real terms in April, surpassing the last peak in 1980. It has jumped around 30% since the beginning of the year. On Friday [June 13], following Israel's attack on Iran, the price approached this peak again.

Since Donald Trump came to power – who promised a “golden age” for America – gold has emerged as the best-performing asset compared to stocks, energy, and major currencies.

For some investors, it had never lost its status as the ultimate safe haven within the international monetary system. Nevertheless, the current resurgence is particularly striking, especially at a time when technological competitors like Bitcoin are gaining ground.

Kenneth Rogoff, former chief economist of the IMF and professor at Harvard, says:

“We often hear that bitcoin is the new gold. I say, 'No, gold is the new gold.' ”

When the price of gold surpassed $3,000 an ounce this year, traders recalled previous shocks: during the 2008 financial crisis, it broke through the $1,000 mark, and then through the $2,000 mark during the Covid-19 pandemic.

“Gold is the ultimate asset of confusion,” comments Luca Paolini, head of strategy at [asset manager] Pictet Asset Management. “It’s what you hold on to when everything is shaky.”

Unlike other assets, gold presents no counterparty risk, and it is difficult for a government to impose sanctions on a metal. Especially since, as a last resort, it can always be buried at the bottom of the garden.

As investors question the health of the dollar, which remains the de facto reserve currency, and the future of US government bonds, the classic safe haven is experiencing a comeback. The main explanation for this surge? “In a word: Trump,” says John Rea.