Key points

• Gold has retreated roughly 30% from January’s all-time high near US$5,600 an ounce, as a more hawkish Federal Reserve and resilient U.S. jobs data have strengthened rate-hike odds.
• The longer-term bull case for gold remains tied to fiscal concerns and doubts over rising government debt along with Central Bank diversification
• Canada is experiencing spikes in gold exports driven by rising commodity prices, repatriation of foreign gold reserves, and a modest increase in volume.

Last October, we wrote about gold’s seemingly relentless rally. At the time, prices were hovering around US$3,825 an ounce, up roughly 40% since the start of 2025. The rally had an unusual feature: gold was climbing even as longer-term bond yields were elevated—higher yields on long-term Treasuries typically discourage gold investments, as investors can earn better returns from interest-bearing bonds than from non-yielding gold.

This suggests investors—mainly central banks—were looking past the usual relationship between gold and interest rates, and instead toward concerns about fiscal sustainability, geopolitical risk, and the reliability of traditional safe-haven assets.

However, it didn't stop there. Gold kept climbing, touching all-time highs near US$5,600 in late January 2026. Since then, prices have slipped about 30% at points. The structural story hasn’t changed, but the path of interest rates has reasserted itself.

A safe haven, sometimes

Gold’s response to the Iran war is a useful case study in how “safe haven” behaviour can get complicated. When conflict initially erupted at the end of February, gold prices barely moved and March was the weakest month for the metal since 2013, even as geopolitical uncertainty remained elevated.

But why didn’t gold rally as it did when uncertainty and geopolitical tensions last peaked? One of the byproducts of the war and its escalation was higher oil prices, which raised inflation concerns, which in turn raised the odds of a Fed rate hike. The U.S. dollar also strengthened as it assumed the role of the safe haven asset of choice. Both effects worked against gold.

The longer-term story hasn’t gone away 

Gold found a fresh, if temporary, tailwind last month. With U.S. federal debt having just crossed US$40 trillion and long-dated Treasury yields sitting near multi-year highs, Treasury Secretary Scott Bessent announced buybacks of 10-to-30-year debt to help suppress yields. Yields on the long-end initially fell, the dollar softened, and gold jumped about 3% to push past US$4,500.

The intervention provided some short-term relief, but it did little to resolve the reason why yields were rising in the first place. 

This creates a “tug-of-war” for gold. The structural case is still intact: record debt loads, a Treasury concerned with its borrowing costs, and central banks consistently being the main buyers of gold. But the cyclical case has become less friendly towards gold. Pulling the other way, a more hawkish Fed under new Chair Kevin Warsh, combined with recent resilient U.S. jobs data, has markets pricing a 60% chance of a rate hike this month. Since gold is a non-interest-bearing asset, rising real yields raise its opportunity cost and explains much of the pullback from its recent peaks.

There are three factors at play here: prices, volumes, and repatriation of foreign reserves. A sizable chunk of the gains has been driven by record-breaking global gold prices*, while volumetric increases have been more modest. 

Lastly, there is  the ongoing trend of European central banks moving gold reserves out of the United States and Canada on the basis of improving crisis preparedness, easier market access, risk dispersion, and reducing exposure to rising global tensions. 

Bottom line: Recent gold price movements reflect a “tug-of-war” between short-term political swings, the expected path of interest rates, and rising concerns over unsustainable debt burdens that show no signs of shrinking. Going forward, structural forces should support gold prices long term, while news and data releases that bolster the case for rate hikes will cause shorter term price swings. Either way, the value of gold in the global financial system should not be understated.

*Statistics Canada monthly import and export price and volume indexes only report on gold, silver, and platinum as a group rather than individually. 

Answer to the previous trivia question: According to Wikipedia, the first "free" school (which would now be called a public school) in what is now Alberta, was established in the Hamlet of Edmonton in 1881.

Today’s trivia question: Which country holds the highest gold reserves in the world?