Going for gold at the Olympics

From Challenger Chief Economist Dr Jonathan Kearns

On the eve of the Paris Olympics the price of gold has been trading around record highs, just below the all-time peak of US$2469/oz reached earlier this month. But the price of silver remains well below its record highs in 1980 and 2011. In case athletes needed any more incentive, this has made coming first at the Olympics even more valuable!

The price of gold often moves in tandem with the US dollar and US interest rates. A cheaper US dollar makes the gold price cheaper for foreign buyers, increasing demand and the gold price. Lower US interest rates reduce the relative cost of holding gold given it doesn’t pay interest, again pushing the gold price higher. Through 2022 and 2023 movements in the US dollar and US rates seemingly drove the gold price, first lower then higher.

But the surge in the gold price in 2024 can’t be explained by these factors. Instead, the run up in the gold price has been attributed to central bank demand, Chinese retail investors and safe haven demand from tensions in the Middle East. It’s also been tied to a ‘Trump trade’ with expectations that a Trump Presidency would push inflation higher.

Given this surge, how does the value of gold compare to past Olympics? To make the race fair, we have to introduce a handicap, adjusting for inflation. Even on this basis, the Paris Olympics starting this weekend top the dais in terms of price of gold in the era of modern Olympics, beating out Moscow (1980) and London (2012).

Notably five of the top six Olympics ranked by the gold price have been in the 2000s, yet another factor increasing the cost of running the Olympics. As a spoiler, Olympic gold medals aren’t all gold, they’re actually 92.5% silver, but the 6 grams of gold that plate them is currently worth over US$460, making the pure metal value of gold medals almost double that of silver medals. No doubt medal winners will value them even more than that.