By David Cottle
Gold has had a good year.
Why wouldn’t it? Interest rates have crumbled and volatility has at times been wrenching.
The metal’s price is up 24% for the year-to-date. That’s a showing only bettered in the past 12 years in 2011. Back then, if you recall, the European sovereign debt crisis was rampant.
All-time peaks are still a long way away
But, as analysts at Macquarie note, the current price around $1,300 per ounce is still 30% below its all-time high of $1,895.
And the real gap is even bigger.
Adjusted for US inflation, “that 2011 high is worth over $2,000/oz in today’s money,” Macquarie said in a note to clients.
So, why isn’t gold higher?
There’s the political uncertainty of the Brexit aftershocks and US elections. And all those central banks, holding interest rates at zero or below zero. Plenty of scope for the oldest haven to go higher.
But here are the three reasons why gold is not (so far) at $2,000, according to Macquarie:
1. Low base price: “First, and most obviously, it started from a low base. Gold’s price low of the current cycle, reached as recently as December 2015, was just below $1,050/oz, more much more than half of that 2011 peak.”