Gold remains 25% below inflation-adjusted record as rate cuts loom

Gold prices remained approximately 25% below their historical inflation-adjusted peak on Friday, 7 August, as investors assess the impact of cooling inflation and shifting central bank policies. While nominal prices have reached multiple highs in 2026, the metal still trails the record set in 1980 when adjusted for purchasing power, leaving room for potential growth as geopolitical risks and interest rate cuts converge. Monetary policy and central bank demand Market data indicates that the primary drivers for gold in the current quarter are the anticipated easing of U.S. Federal Reserve interest rates and sustained purchasing by central banks. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets like gold. Furthermore, institutional demand from emerging markets has provided a consistent floor for prices, as nations seek to diversify reserves away from the U.S. dollar. Inflation and real record highs The distinction between nominal and real prices remains a critical metric for long-term investors. To surpass the inflation-adjusted record set over four decades ago, gold would need to trade significantly higher than its current spot levels. The…