Wall Street’s top analyst sees something weird going on with gold and interest rates, and warns inflation risks are rewriting market logic

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 braci...