Gold Is at a Record High. Why It Is Set to Rise Even More.

Is gold’s strength a flash in the pan or a golden opportunity?

The yellow metal just completed its best two-quarter stretch in eight years on its way to a record high of $2,319 per ounce today.

That performance comes as a bit of a surprise at first blush. After all, gold prices typically rise when interest rates decrease and fall when rates swing higher. Yet recent economic data suggest the Federal Reserve will have to keep interest rates elevated for longer than previously thought to tame inflation.

There has been some good news on inflation. Last Friday, for instance, we learned that the core personal consumption expenditures (PCE) index, which is the Fed’s preferred inflation measure, rose just 2.8% year over year and 0.3% month over month, as expected , in February.

Shorter-term trends paint a more challenging picture for the Fed, however, given that the three-month core PCE trend reflects 3.5% annual growth compared with 2.5% in late 2023.

“The relevant news is that recent inflation data are rising briskly,” writes Michael Lewis, who heads Free Market Inc., an economic consulting firm. This translates into higher rates for longer as the odds of a June rate cut have fallen to 58% from 73% a month ago. Mary Daly, the chief of the San Francisco Federal Reserve, said Tuesday there is “ really no urgency ” to cut rates. Fed Chairman Jerome Powell echoed that sentiment today.

Monday’s ISM manufacturing index report reinforces that narrative . In March, the index delivered its strongest growth since September 2022, rising to 50.3, easily exceeding the expectation of 48.4.

Not surprisingly, on Monday, stocks fell as the yield on the 10-year bond surged to 4.32%. Tuesday we saw more of the same with key stock indexes falling and the 10-year yield rising as high as 4.4% , its highest level in 2024 . Higher rates have been pressuring stocks, bonds, and cryptocurrencies .

Gold is powering higher, however. March 22 is the last day that gold prices fell. The price of gold has risen 9.7% this year while the yield on the 10-year has gained 10.4%.

“Gold is the near-zero yielder that is then showing record demand, despite a world where high nominal yields and carry are still dominant,” wrote Deutsche Bank macro strategist Alan Ruskin in a newsletter last week. “If gold prices won’t go down in an inflated nominal yield world, they can surely go up as the G-10 yield plateau gives way, and yields likely start their descent in” the second half of this year, Ruskin continued.

So what explains gold’s recent rise amid higher rates? Strong demand from China is one factor . The People’s Bank of China went on a buying spree last year, acquiring a net 225 metric tons of gold—the most among all central banks and the country’s biggest expansion of gold reserves since 1977.

With China’s central bank reserves at a record high, its consumers are also actively buying the precious metal, partly due to concerns about their economy and stock market. Among Chinese investors, demand for gold-related ETFs is “booming,” according to The Wall Street Journal, and Chinese imports of gold have surged 51% in the first two months of 2024 compared with the same period last year.

Gold’s more volatile counterpart, silver, surged to a two-year high today, gaining 5% to $27.22 per ounce. Unlike gold, which is at a record high, silver would need to rise more than 80% to reach its 2011 high of near $50.

“The formerly nonchalant silver finally appears ready to join gold’s advance,” John Roque, a technical analyst at 22V Research, wrote in a note, Barron’s reported . “$30 as the first target and then, presuming a breakout, $40 as the second target.” Silver prices are up 12.5% this year.

The entire commodities complex is showing relative strength as the Bloomberg Commodity Index is at its highest level since December . Crude oil is 20.6% higher this year.

Safe-haven demand for gold may increase given fast-rising geopolitical tensions in the Middle East. Moreover, concerns about the national debt are growing louder and more pointed from notable figures across the political spectrum. Unfortunately, there is no indication that politicians will quit pandering to short-term considerations (meaning votes) by making tough choices. As such, expect them to keep playing Kick the Can until one of them slices their foot.

Given all of this, the outlook for gold remains bright . On March 29, Barron’s cited an analysis by economist Charles Gave, founder of Gavekal Research. “The S&P 500 is on the verge of becoming overvalued versus the stock of capital, while gold is almost undervalued against my measure of retained earnings.”

Gave added, “Gold is ‘undervalued’ against the S&P 500 by a hefty -52% and -13% versus its own long-term trend. In contrast, the S&P 500 stands 33% above its own long-term trend level.” Recommending that investors hedge equity exposure with at least 20% of their portfolio in gold, Gave concluded, “At this point my preference based on the relative position of the two reserve assets is to favour gold, followed by equities.”

It’s go time for the highest-stakes mission at NASA in more than 50 years.

On April 1, the agency is set to launch four astronauts around the moon, the deepest human spaceflight since the final Apollo lunar landing in 1972.

The launch window for Artemis II , as the mission is called, opens at 6:24 p.m. ET.

National Aeronautics and Space Administration teams have been preparing the vehicles to depart from Florida’s Kennedy Space Center on the planned roughly 10-day trip. Crew members have trained for years for this moment.

Reid Wiseman, the NASA astronaut serving as mission commander, said he doesn’t fear taking the voyage. A widower, he does worry at times about what he is putting his daughters through.

“I could have a very comfortable life for them,” Wiseman said in an interview last September.

“But I’m also a human, and I see the spirit in their eyes that is burning in my soul too. And so we’ve just got to never stop going.”

Wiseman’s crewmates on Artemis II are NASA’s Victor Glover and Christina Koch, as well as Canadian Space Agency astronaut Jeremy Hansen.

Photo: NASA’s Artemis II SLS rocket and Orion spacecraft being rolled out at night. Miguel J. Rodriguez Carrillo/Getty Images

What are the goals for Artemis II?

The biggest one: Safely fly the crew on vehicles that have never carried astronauts before.

The towering Space Launch System rocket has the job of lofting a vehicle called Orion into space and on its way to the moon.

Orion is designed to carry the crew around the moon and back. Myriad systems on the ship—life support, communications, navigation—will be tested with the astronauts on board.

SLS and Orion don’t have much flight experience. The vehicles last flew in 2022, when the agency completed its uncrewed Artemis I mission .

How is the mission expected to unfold?

Artemis II will begin when SLS takes off from a launchpad in Florida with Orion stacked on top of it.

The so-called upper stage of SLS will later separate from the main part of the rocket with Orion attached, and use its engine to set up the latter vehicle for a push to the moon.

After Orion separates from the upper stage, it will conduct what is called a translunar injection—the engine firing that commits Orion to soaring out to the moon. It will fly to the moon over the course of a few days and travel around its far side.

Orion will face a tough return home after speeding through space. As it hits Earth’s atmosphere, Orion will be flying at 25,000 miles an hour and face temperatures of 5,000 degrees as it slows down. The capsule is designed to land under parachutes in the Pacific Ocean, not far from San Diego.

Water photo: NASA’s Orion capsule after its splash-down in the Pacific Ocean in 2022 for the Artemis I mission. Mario Tama/Press Pool

Is it possible Artemis II will be delayed?

Yes.

For safety reasons, the agency won’t launch if certain tough weather conditions roll through the Cape Canaveral, Fla., area. Delays caused by technical problems are possible, too. NASA has other dates identified for the mission if it doesn’t begin April 1.

Who are the astronauts flying on Artemis II?

The crew will be led by Wiseman, a retired Navy pilot who completed military deployments before joining NASA’s astronaut corps. He traveled to the International Space Station in 2014.

Two other astronauts will represent NASA during the mission: Glover, an experienced Navy pilot, and Koch, who began her career as an electrical engineer for the agency and once spent a year at a research station in the South Pole. Both have traveled to the space station before.

Hansen is a military pilot who joined Canada’s astronaut corps in 2009. He will be making his first trip to space.

Koch’s participation in Artemis II will mark the first time a woman has flown beyond orbits near Earth. Glover and Hansen will be the first African-American and non-American astronauts, respectively, to do the same.

What will the astronauts do during the flight?

The astronauts will evaluate how Orion flies, practice emergency procedures and capture images of the far side of the moon for scientific and exploration purposes (they may become the first humans to see parts of the far side of the lunar surface). Health-tracking projects of the astronauts are designed to inform future missions.

Those efforts will play out in Orion’s crew module, which has about two minivans worth of living area.

On board, the astronauts will spend about 30 minutes a day exercising, using a device that allows them to do dead lifts, rowing and more. Sleep will come in eight-hour stretches in hammocks.

There is a custom-made warmer for meals, with beef brisket and veggie quiche on the menu.

Each astronaut is permitted two flavored beverages a day, including coffee. The crew will hold one hourlong shared meal each day.

The Universal Waste Management System—that’s the toilet—uses air flow to pull fluid and solid waste away into containers.

What happens after Artemis II?

Assuming it goes well, NASA will march on to Artemis III, scheduled for next year. During that operation, NASA plans to launch Orion with crew members on board and have the ship practice docking with lunar-lander vehicles that Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin have been developing. The rendezvous operations will occur relatively close to Earth.

NASA hopes that its contractors and the agency itself are ready to attempt one or more lunar landing missions in 2028. Many current and former spaceflight officials are skeptical that timeline is feasible.

Gold Is at a Record High. Why It Is Set to Rise Even More.

The lunar flyby would be the deepest humans have traveled in space in decades.