Apollo chief economist Torsten Slok has found a head-scratcher buried in the financial data: For years, the price of gold and real interest rates have been inversely correlated; as interest rates rise, the price of gold goes down. Now, however, the relationship between the two variables is completely scrambled with no discernable pattern, and Slok sees it as yet another sign investors are getting jittery about the state of the economy.
“Much to the frustration of the quant community, when the Fed started raising interest rates in 2022, the strong correlation between gold and real rates broke down,” Slok wrote in a blog post on Monday.
Gold has cemented itself as a safe-haven asset, viewed as a life preserver in a time of choppy market waters. Since the initial rate hike in 2022, the price of gold has skyrocketed, increasing by more than 150% to hit a record-breaking $5,000 per troy ounce last month. Investors like Bridgewater Associates founder Ray Dalio have advocated for 15% of one’s portfolio to be allocated toward gold amid crescendoing geopolitical tensions and mounting U.S. debt. But gold’s now unpredictable relationship with a once-reliable correlate is yet another sign investors are bracing themselves in case things go sideways.
“It tells you that investors are anxious about the level of returns they get in traditional assets,” Slok told Fortune. “And that’s why investors are beginning to look at alternative assets.”
Citing data from Bloomberg and Macrobond, Slok notes that prior to early 2022 when the Fed began hiking rates to curb post-pandemic inflation that peaked around 9%, the price of gold and interest rates were inversely correlated. But after the Fed’s 2022 hikes, this was no longer the case. Instead of gold prices falling, which would follow the pattern of previous rate hikes, they instead remained resilient. As the Fed held rates steady, gold prices continued to climb.
According to Slok, this broken-down relationship signals to the market that in times of elevated interest rates, investors have additional considerations when pricing future outcomes—particularly for gold—in part a result of inflation remaining stubbornly elevated since early 2021.
“The bottom line is that new risks emerge when inflation is persistently above the Fed’s 2% target, which is where we continue to be today,” Slok said in his blog post.
What caused the breakdown in the gold–interest rate relationship?
Gold is a unique asset, wrote Goldman Sachs analysts Lina Thomas and Daan Struyven in an August 2025 Gold Market Primer report. It is hard to mine, and its supply grows only a little each year, with nearly all of the gold ever extracted from the earth still in supply, trading hands, as opposed to being produced or destroyed, giving it its precious value.
“Each year, more rock, more energy, more labor, and more capital are needed to produce the same ounce,” the analysts said. “This limited, slow-moving, price-inelastic supply is what has given gold its status as a store of value—what made gold … gold.”
In the past, gold’s inverse interaction with interest rates has resulted from the fact that the precious metal does not have yields and does not pay interest or dividends. When interest rates are high, gold becomes less appealing because of the increased opportunity costs of holding other assets like bonds. Conversely, demand for gold usually skyrockets when rates are cut, when holding assets that can produce cash flow are viewed as less advantageous.
But swelling inflation following the onset of the pandemic changed this relationship. In 2022, conventional 60/40 portfolios—made up of 60% equities and 40% bonds—took a hit as markets roiled, and inflation and rate hikes made bonds less of a hedge for stocks. Meanwhile, gold, typically a hedge against inflation owing to its inelastic value, soared.
While inflation has receded, hovering around 2.7%, Slok said he believes its persistent elevation has created a new normal of gold having more appeal, and traditional assets having less.
“I know this may sound like [3%, 2%] what’s the difference?” Slok said. “But this is really meaningful. If you allow inflation to be three for an extended period, then your portfolio will be eroded by 3% every year, instead of being eroded by 2% every year.”
The role of geopolitical tensions
There are also geopolitical factors that have boosted the price of gold, particularly Russia’s war on Ukraine, which not only drove up the price of gold as investors rushed toward real assets, but also because of the resulting sanctions on Russia. These sanctions trigger central banks to snap up gold, seeing it as a sanctions-proof asset.
Central banks’ desire for gold has been compounded amid President Donald Trump’s “TACO” trade as they reduce—but still greatly rely on—fueling their reserves with the U.S. dollar.
“Elevated perceived macro policy risk in 2025 has not reversed,” Thomas and Struyven wrote in a note to clients last month. “The perception of these macro policy risks appears stickier. We thus assume that [gold-based] hedges of global macro policy risks remain stable as these perceived risks (e.g., fiscal sustainability) may not fully resolve in 2026.”
What does the future hold?
Slok isn’t so certain there will be a return to a predictability in gold prices that once neatly aligned with interest rates. He noted gold’s popularity will depend on how long investors see increased inflation (and geopolitical tensions) as a threat to their other assets—and if it’s poised to become the new normal.
“Maybe now we have a permanently higher inflation regime, and therefore maybe I need my permanent protection by buying real assets, of course, in particular gold,” Slok said of investors’ thought processes.
Slok saw the continued rise of enthusiasm toward private credit and international assets as a natural consequence of this shift, perhaps stoking the “Sell America” trade that emerged out of concern over Fed independence and Trump’s repeated threats of taking over Greenland. This trend will continue, Slok suggested, as long as investors view inflation decreasing as a lost cause.
“Do investors feel that these four years since 2022 were an anomaly, or is it really a new regime that we have entered?” he said.
