The metal’s inflation-adjusted record high is $3,580.44 an ounce, reached in January 1980

This tiny bit of metal traded as high as $3,017.10 an ounce on Friday.

Gold’s climb to an all-time high above $3,000 an ounce this week certainly turned heads, but its value is still around 16% below its inflation-adjusted record from 1980.

Inflation fears similar to those seen over four decades ago and sharp gains in purchases by Western central banks might provide enough incentive to bring the precious metal to a true record high.

“Gold shot up in the early 1980s as inflation expectations rose at a faster rate than actual inflation,” said Chris Mancini, associate portfolio manager of Gabelli Gold Fund. The market thought that there was a “risk that prices would become untethered, and that the U.S. would enter into a hyperinflationary spiral,” he said.

That didn’t quite happen at the time. Inflation reached more than 14% in 1980 but eventually declined to average 3.5% in the latter half of the decade, according to Federal Reserve History, a website maintained by a division of the Federal Reserve Bank of St. Louis.

That fear over the potential for a rapid rate of inflation contributed to a climb in most-active gold futures on Jan. 21, 1980, to an intraday high of $873 an ounce.

That’s $3,580.44 in today’s dollars, according to a Dow Jones Market Data analysis of numbers from FactSet. On that same date, prices marked a settlement high of $834, or $3,420.49 on an inflation-adjusted basis.

Friday’s settlement for April gold at $3,001.10 an ounce on Comex — up $9.80, or 0.3%, for the session after tapping an intraday high of $3,017.10 — pales in comparison.

Back in the 1980s, “interest rates were in the high teens, as was inflation,” said David Miller, portfolio manager of the Strategy Shares Gold Enhanced Yield exchange-traded fund.

The U.S. Federal Reserve’s target range for the federal-funds rate currently stands at 4.25% to 4.50%, and the inflation rate, based on the consumer-price index, was 2.8% over the 12 months ending in February.

A scenario like that of the early 1980s would have to transpire again to see gold prices reach an inflation-adjusted record high, Mancini said.

“We would need [to see] inflation increase to the extent that the market started to fear that purchasing power would erode at an accelerating rate,” he told MarketWatch. “In that circumstance, investors would buy gold as way to maintain their purchasing power.”

However, Miller, who is also chief investment officer at Catalyst Funds, said central banks replacing dollar reserves with gold reserves should, over time, get gold up to that inflation-adjusted record high.

“The status quo of central bank gold buying, running roughly 1,000 metric tons on net in gold purchases, will get us there … combined with current government deficits and inflation,” he said.

“Nothing new has to happen, just the continuation of the status quo,” Miller said, adding that ETF flows are “pretty small compared to central bank bullion purchases.”

Still, Gabelli Gold Fund’s Mancini pointed out that “gold-backed ETFs are finally starting to see inflows after years of outflows.” That’s very important, he said, because ETFs are the “marginal source of demand and supply of physical gold.”

In a March 6 report, the World Gold Council said global gold exchange-traded funds saw a third consecutive month of inflows in February, totaling $4.9 billion, the strongest since March 2022.

Stefan Gleason, president and CEO of Money Metals Exchange, meanwhile, told MarketWatch that Asia and the Middle East have continued to buy gold over the past two to three years, including central banks.

“If retail investors in North America and Europe start increasing gold purchases, it would add fuel to the fire,” he said. For now, “we’re barely seeing that yet, but it could be coming soon — if for no other reason than fear of missing out.”

Net gold buying from Western investors, measured by gold-ETF inflows, only began last month, after nearly three years of “softness,” Gleason said.

If that renewed demand from North American and European investors continues, that would “fuel further gains for the yellow metal, and we could still see several hundred dollars added to the gold price this spring,” he said.

After that, Gleason said he would expect a “period of consolidation or weakness through the summer and early fall.”