Gold prices enjoyed a stellar rally in the immediate aftermath of the 2008 global financial crisis. As the markets across the world plunged, investors sought the safety in gold, often dubbed as a safe haven asset.
Gold prices rose to highs of $1920 by late 2011 and have, since then, been easing back. The gains came as central banks made an effort to revive their respective economies. Interest rates were cut to zero and in many cases, interest rates were negative. Central banks also embarked on launching monetary stimulus policies, known as quantitative easing (QE), in order to boost the economy.
Since the peak in 2011, gold prices have been gradually declining. In December 2015, gold prices posted a bottom, touching lows of 1046.00 before starting another leg in the rally.
In the past few years, as the U.S. economy started to improve, the Federal Reserve slowly started to taper it's QE program. The path towards normalization eventually led the Fed to hike interest rates for the first time in 2016. The following year, the Fed also started to unwind its balance sheet, albeit at a gradual pace.
Besides the Fed, other central banks also joined hands to begin tightening monetary policy. The Bank of Canada was the next central bank to have hiked interest rates, surprising the markets with two rate hikes in 2017.
The Bank of England also hiked interest rates, albeit for other reasons. As UK's inflation overshot the central bank's 2.0% inflation target rate, the BoE was forced to hike rates in a humble effort to cool inflation.
The European Central bank was next as it announced a taper to its QE program. Markets expect to see the ECB starting its path towards normalization by 2019 end. More recently, the BoJ's announcement to cut down on its longer term Japanese Government Bonds also took the markets by surprise.
While gold has managed to perform strongly in the crisis-era, the big question for investors now is whether the safe haven asset will continue to rise. Until a few years ago, gold enjoyed the top status as a safe haven asset, the rise of cryptocurrencies has posted a considerable threat to gold.
