What’s going on here? A bar of gold now goes for a cool $1 million, with the latest rally pushing its price above the seven-digit threshold for the first time ever. What does this mean? Gold has been white-hot lately. Investors have taken a new shine to it as some of the world’s major central banks have begun cutting interest rates, sending bond yields lower. That’s added to the allure of the precious metal, which doesn’t generate any income but is seen as a secure store of value. In fact, its perceived safe-haven status has made gold especially fashionable now, as recession worries and escalating geopolitical tensions have folk waiting for a heavy shoe to fall. Combined with slimmer bond yields, those fears have helped drive gold’s price up by more than 20% this year, to a record of $2,522 per troy ounce on Tuesday. Why should I care? Zooming in: Good as gold. Traders are becoming increasingly certain that the Federal Reserve will begin cutting interest rates in September. That’s sent the dollar to its weakest level against many of its peers this year, since lower rates make a currency less attractive to overseas savers and investors. And those cheaper Benjamins have been good for gold. See, like most commodities, the yellow metal is priced in US dollars. So when the greenback weakens, gold goes on sale across much of the world – which can increase demand and push up its price. The bigger picture: Staying gold. Rising gold prices and falling interest rates show that traditional drivers, like bond yields, are falling back into place again. Earlier this year, the metal’s price went up even as yields increased, which, understandably, caught people by surprise. But that was mainly because central banks – especially in emerging markets – were stockpiling those 400-ounce bars as protection against the impacts of inflation, and as a way to diversify their reserves away from the dollar. | 