Looking back at past cycles, gold’s historical rallies often signal deeper undercurrents in the macroeconomic landscape. What tends to spark interest in gold is when it stops feeling expensive to hold—especially compared to other assets. Since gold doesn’t yield interest or dividends, it becomes more attractive when interest rates are low—there’s simply less to lose by holding a non-yielding asset. But what really moves the needle isn’t just the rates—it’s what people think is coming next.
When inflation rises, central banks typically respond by hiking interest rates to cool the economy. But if inflation spikes and the rate hikes are too timid—or worse, delayed—the market reacts swiftly. As faith in monetary policy erodes, gold always finds its way back into the spotlight. Conversely, if inflation declines and rates are still rising, it signals policy overshoot, which can also rattle markets. These mismatches—between what institutions do and what markets expect—are where volatility thrives.
We’ve seen this play out in recent years: inflation surprises have led to aggressive repricing across asset classes. If the market expects rate hikes and they don’t materialize, gold often rallies as investors brace for persistent inflation. If rate cuts are anticipated but central banks hold firm, equities may stumble while gold holds steady. These policy misalignments amplify uncertainty, and gold—viewed as a safe haven—benefits from the chaos.
Central banks themselves are part of this story. During uncertain times—be it economic instability, geopolitical tensions, or war—many increase their gold reserves, further driving demand. Asset managers, too, consistently allocate a portion of portfolios to gold, not for growth, but for resilience. It’s always in demand, especially when stability is nowhere to be found.
And what about equities? Historically, when gold prices soar, it often reflects caution in the stock market. Rising inflation and interest rate hikes compress corporate margins and dampen valuations. But if inflation cools and rate cuts are on the horizon, stocks can rebound sharply. The key is whether central banks hit their policy marks. When they do, markets stabilize. A misstep in policy sends investors toward gold, while equities lose their footing.