RBA faces multi-billion dollar regret as gold prices hit record highs

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The price of gold is likely to climb to $US3000/oz ($4824) in the coming weeks as concerns of an escalating trade war further fuel demand, continuing last year’s record-breaking run for the shiny yellow metal.

“Last week’s breakout in gold clears the way for a move towards $US2850/oz in days, with scope towards $US2950/oz in coming weeks,” says Tony Sycamore, an analyst at IG Markets.

Australia’s central bank, the Reserve Bank of Australia (RBA), has not changed its stockpile of gold for more than 25 years.Credit: Louie Douvis

Gold has hit fresh highs recently on the back of rate cuts from European central banks, worries of ballooning US government debt, and heightened concerns about tariffs, which eventuated over the weekend.

“Gold is a safe-haven asset and will likely do well in the event of any trade war following last weekend’s (tariff) news,” says Sycamore. “What could really hurt the Australian market is if China follows Canada in retaliation.”

Gold was one of the best-performing asset classes of 2024, outperforming both the Australian and US stock markets, and is now marking its best performance in 29 years – although unlike shares, gold doesn’t pay any dividends.

Having grown up near the Ballarat goldfields, I’ve watched gold’s relationship with interest rates closely. When this relationship decoupled in 2022 – before which gold would move inversely to rates – it marked a fundamental shift in the market.

In the last financial year, the value of the RBA’s gold reserves grew by 22 per cent to $9 billion.

According to Goldman Sachs, the decoupling occurred as a result of global central banks stepping up purchases in gold as a response to the United States’ move to freeze Russia’s central bank assets after the invasion of Ukraine.

This decision spooked other nations – most notably China, Hong Kong and India, who have been the largest buyers of gold lately – into stockpiling gold, an asset that no government can freeze.

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