The price of gold continued to rise, reaching a new record on Monday. The reasons are many: in the US, there are signs that the US Federal Reserve is moving closer to cutting interest rates, and in China, consumers have made a “phenomenal” buying spree as they look for a safe place to stash post-trouble cash. .in this real estate.

But despite hitting a new nominal high, gold is still far from the inflation-adjusted all-time high of $3,355 an ounce reached in 1980, when inflation and turmoil in the Middle East sent the price of the yellow metal soaring.

Gold has now surpassed 3 previous highs of $2,000 an ounce – thresholds set by the 2020 coronavirus pandemic, the 2022 Russian invasion of Ukraine and the US banking crisis that erupted last year.

Investing in gold, however, is controversial. Some see this as a good hedge against inflation. Others, like John M. Keynes, see it as a barbaric relic. an important holding to protect against inflation. Others see it as nothing more than a barbaric relic with poor returns.

Famous investor Warren Buffett said of gold, which he hated as an investment: “It’s better to have a goose that lays eggs than a goose that just sits and swallows insurance and storage costs.”

The modern history of gold as an asset class began in 1971, when the US officially broke the link between the US dollar and gold. During the 1970s and 1980s, the dollar price of gold increased more than 10-fold, according to the World Gold Council. This growth has outpaced consumer prices, which have doubled over the decade.

In the following years, gold lost more than 20% of its value – both in the 1980s and in the 1990s.

Then, in the first decade of this century, there was another twist. The S&P 500, battered first by the bursting of the dot-com bubble and then by the financial crisis of 2008-2009, has lost 9% over the decade, while gold has gained 275%.

But gold’s performance in the 1970s and 2000s was no fluke. Concerns about too loose a monetary policy played a big role in the 1970s, when the Federal Reserve cut interest rates to 1 percent after the dot-com bust, then to zero, and launched quantitative easing after the financial crisis.

As trust in society and political institutions declines, the allure of gold and other precious commodities such as diamonds increases.

Returning to the present, the war in Ukraine, rising tensions between China and the US, and a possible conflict in Taiwan could all be geopolitical arguments supporting high gold prices.

There is also a U.S. election coming up, and both camps fear serious economic consequences if they lose.

As a non-yielding asset, gold tends to rise when yields on other assets fall.

In a recent note, UBS bankers also attributed the rise in gold prices to gold purchases by central banks around the world, which reached their highest level since the 1960s (more than 1,000 metric tons in each of the past two years).