The price of gold has had a nice run, but it has not been smooth. Having risen to $1,350 an ounce in April 2018, gold sunk below $1,200 by August 2018. Then prices rebounded above $1,300 by March 2019, took a breather and then pressed onward to pass through $1,400 in the summer of 2019.

There is plenty of controversy about what drives the gold price -- global tensions, portfolio diversification, production costs, demand from China or central banks, etc. -- all these factors matter. However, our research suggests that currently the one most important factor is the direction of interest rates in the United States.

Having risen to $1,350 in April 2018, the realization that the Fed was on a path to keep on raising rates, possibly through 2019, sunk gold to below $1,200 by August 2018.

It was not until the Fed let it be known that it was going to halt its relentless step-wise rate-rise program back in late 2018 that gold moved from $1,200 to $1,300. And, again in the summer of 2019, it was the Fed's signal that it was willing to cut rates that ignited the rally that brought gold to over $1,400 per ounce.

This interpretation that gold is now predominantly rate-driven comes with some interesting suggestions:

1) For gold prices to head for $1,600 or higher, it will take a few more rate cuts from the Fed.

2) Global tensions still matter for gold, but with the trade war in play, global tensions are now correlated with economic expectations and, thus, rates. That is, worsening tensions lead to decelerating growth, and then to rate cuts -- good for gold prices. While unlikely any time soon despite continued U.S.-China trade talks, an end to the trade war would raise global growth expectations and bring back the possibility of rate hikes. That's not good for gold.

3) And, if the first two points hold, then gold is probably not nearly as beneficial for portfolio diversification as it once was.

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(This article is sponsored and produced by CME Group, which is solely responsible for its content.)