Gold broke price records on Friday at US$2,183 an ounce, following a Bitcoin rally.

Gold has a longstanding relationship with Treasury Inflation Protected Securities (TIPS), both hedges against unexpected inflation or debasement of the dollar.

From 2007 to 2022, gold price moved in lockstep with TIPS yields, but the seizure of Russian reserves after Moscow’s invasion of Ukraine changed this.

The seizure of Russian reserves persuaded many foreign investors to shift to gold.

The value of gold predicted by TIPS yields remained close to the actual gold price from 2007 to 2022, but then decoupled, making gold nearly $900 “rich” to TIPS yields.

The divergence between TIPS yields and gold is at an all-time high.

The cost of options on the S&P 500 and major currencies is near its all-time low, despite the strong performance of world stock markets and the subdued price of risk hedges in options markets.

Options only provide short-term fluctuations, and their payout depends on the smooth functioning of derivative markets.

Investors want insurance against extreme events like geopolitical crises, but are unwilling to pay much for short-term fluctuation hedges.

The likelihood of a black swan event is increasing despite the calmness of markets.