Author：Currency Explorer

Torsten Slok, chief economist at Apollo Global Management, discovered a puzzling phenomenon in financial data: for years, gold prices have shown a negative correlation with real interest rates—when interest rates rise, gold prices fall, and vice versa. But...The relationship between the two is now completely chaotic and without any discernible pattern.Slok believes thatThis is yet another sign of growing investor anxiety about the economic outlook.

"What's incredibly frustrating for the quantitative investment community is that the strong correlation between gold and real interest rates has completely collapsed since the Federal Reserve started raising interest rates in 2022," Slok wrote in a blog post on Monday.

Gold has firmly established itself as a safe-haven asset, seen as a "lifeline" during market turmoil. Since the first interest rate hike in 2022, gold prices have soared, with a cumulative increase of over 150%, reaching a record high of nearly $5,600 per ounce last month.

Investors, including Bridgewater Associates founder Ray Dalio, suggest allocating 15% of their portfolios to gold amid heightened geopolitical tensions and high U.S. debt.

Today, the relationship between gold and its once highly reliable correlation indicators has become unpredictable, once again indicating that investors are preparing for potential market volatility.

This showsInvestors are anxious about the returns of traditional assets."That's why they started paying attention to alternative assets," Slok told Fortune magazine.

According to data from Bloomberg and Macrobond, cited by Slok, gold prices and interest rates showed a stable negative correlation before the Federal Reserve began raising interest rates in early 2022 to curb inflation, which peaked at around 9% after the pandemic. However, this pattern did not hold true after the 2022 rate hikes: gold prices did not fall as they had in previous rate hike cycles, but instead remained resilient; even when the Federal Reserve kept interest rates unchanged, gold prices continued to rise.

Slock believes that the breakdown of this relationship sends a signal to the market: in a high-interest-rate environment, investors will consider more factors when pricing in the future—especially for gold, partly because inflation has remained stubbornly high since the beginning of 2021.

The core conclusion is,New risks emerge when inflation persists above the Federal Reserve's 2% target, and we are currently in that situation."Slok wrote in his blog."

Why has the relationship between gold and interest rates broken down?

In their August 2025 report, "Introduction to the Gold Market," Goldman Sachs analysts Lina Thomas and Daan Struyven wrote that gold is a unique asset: it is difficult to mine, has very little annual supply growth, and almost all the gold mined throughout human history is still in circulation rather than being consumed or destroyed, which gives it its precious value.

“Producing the same ounce of product requires more rocks, energy, labor, and capital every year,” analysts said.This limited, slow, and inelastic supply makes gold a store of value—this is precisely what makes gold gold..

In the past, the negative correlation between gold and interest rates stemmed from its interest-free nature: it does not pay interest or dividends. In a high-interest-rate environment, the opportunity cost of holding gold increases, making it less attractive; conversely, when interest rates fall, the advantage of interest-bearing assets weakens, and demand for gold often surges.

However, the surge in inflation following the pandemic altered this relationship. In 2022, the traditional "60/40" portfolio (60% stocks + 40% bonds) was severely impacted, as inflation and rising interest rates weakened the hedging effect of bonds against stocks. Meanwhile, gold, considered an inflation hedge due to its value elasticity, saw a significant price increase.

Although inflation has fallen to around 2.7%, Slock believes thatIts continued high levels have created a new normal: gold is becoming more attractive while traditional assets are becoming less so.

“I know this might sound like, ‘What’s the difference between 3% and 2%?’” Slok said, “but it makes a lot of sense. If inflation stays at 3% for a long time, your portfolio will be eroded by 3% every year, instead of 2%.”

The role of geopolitics

Geopolitical factors have also driven up gold prices, especially the Russia-Ukraine conflict: on the one hand, investors flock to physical assets as a safe haven; on the other hand, sanctions against Russia have prompted central banks around the world to accelerate their gold purchases, viewing gold as a "sanctions-resistant" asset.

Amid the Trump administration's "TACO" trade policy, central banks' willingness to purchase gold has further increased—they are reducing their reliance on dollar reserves, but remain highly dependent on the dollar.

“The high level of macroeconomic policy risks in 2025 has not been reversed."These macroeconomic policy risks appear to be more sticky in perception," Thomas & Struve wrote in a client report last month. "Therefore, we believe that demand for gold as a hedge against global macroeconomic policy risks will remain stable, as these risks, such as fiscal sustainability, may not be fully resolved by 2026."

What will the future hold?

Slok is unsure whether gold prices will revert to a predictable state of high correlation with interest rates. He points out that...Gold’s popularity will depend on how long investors view high inflation (and geopolitical tensions) as a threat to other assets—and whether that will become the new normal.

“Perhaps we have now entered an era of permanent high inflation, so investors need to obtain permanent protection by buying physical assets (especially gold),” Slok described the investor mentality.

He believes the continued surge in private lending and international assets is a natural consequence of this shift, and may further fuel the "sell-off of US assets" driven by concerns about the Federal Reserve's independence and Trump's repeated threats to annex Greenland. Slok stated,This trend will continue as long as investors believe there is no hope for inflation to fall.

One question worth considering is: "Do investors view the past four years since 2022 as an anomaly, or have we truly entered a new era?" he said.