Gold prices surged above $5,000 (£3,659) an ounce for the first time, extending a historic rally. The precious metal has gained more than 60% during 2025, marking an unprecedented year.
Escalating geopolitical and financial tensions have driven the surge. Disputes between the United States and Nato over Greenland have unsettled investors. Markets are increasingly sensitive to global instability.
US President Donald Trump has added to uncertainty with aggressive trade policies. He recently threatened a 100% tariff on Canada. The warning targets any Canadian trade deal with China.
Investors turn to safe havens
Gold often attracts buyers during turbulent periods. Many see it as protection against market shocks and political risk. Silver has followed the trend, climbing above $100 an ounce.
Silver extended gains of nearly 150% from last year. Other precious metals have also seen strong demand. Investors have reduced exposure to riskier assets.
Economic pressures have strengthened buying. Inflation remains high across major economies. A weaker US dollar has boosted international demand for gold.
Central banks have continued increasing bullion reserves. Expectations of further US interest rate cuts have added momentum.
Conflict and politics push prices higher
Global conflicts have lifted gold further. Fighting in Ukraine and Gaza has intensified anxiety. Political developments involving Venezuela have shaken investor confidence.
These events have driven demand toward tangible assets. Gold benefits when trust in political systems declines. Analysts say prices reflect widespread concern.
Scarcity underpins long-term value
Gold’s limited supply remains a major attraction. About 216,265 tonnes have ever been mined, according to the World Gold Council. That volume would fill three to four Olympic swimming pools.
Most gold entered circulation after 1950. Advances in mining technology expanded production. Even so, future supply growth now appears constrained.
The US Geological Survey estimates 64,000 tonnes remain underground. Experts expect production to plateau in coming years. Scarcity is likely to sustain prices.
An asset independent of debt risk
Analysts highlight gold’s separation from financial liabilities. Nicholas Frappell of ABC Refinery said gold carries no counterparty risk. Bonds and equities rely on issuers and companies.
Frappell described gold as a strong portfolio diversifier. He said uncertainty has increased its appeal. Investors value assets outside traditional finance.
A historic year for precious metals
Gold posted its biggest annual gain since 1979 during 2025. Investors poured into metals amid repeated market shocks. Prices set new records multiple times.
Trade tariff fears and expensive technology stocks fueled demand. Many investors questioned equity market valuations. Gold benefited from these concerns.
Susannah Streeter of Wealth Club said gold continues defying expectations. She said political uncertainty keeps demand strong. Trade tensions have repeatedly unsettled markets.
Rate cut expectations drive demand
Gold often rises when investors expect lower interest rates. Reduced rates shrink returns on bonds. Investors then turn to gold and silver.
Markets widely expect two US rate cuts this year. Falling yields reduce the appeal of government debt. Analysts say gold benefits from this shift.
Ahmad Assiri of Pepperstone said investors move away from bonds. He said lower opportunity costs favour gold. Many investors now choose metals instead.
Central banks reshape global reserves
Central banks have played a major role in the rally. They added hundreds of tonnes of gold to reserves last year. Official sector buying remains strong.
Analysts see a clear shift away from the US dollar. Kavalis said this trend has strongly supported gold prices. Many countries seek diversification.
Despite the surge, risks persist. Frappell warned that news-driven markets can reverse quickly. Positive global developments could weigh on prices.
Cultural demand fuels buying
Gold demand extends beyond investment motives. Many cultures value the metal for tradition and celebration. Families often buy gold during festivals and weddings.
In India, Diwali remains a major buying period. Many believe gold brings prosperity and luck. Gold gifts remain common.
Morgan Stanley estimates Indian households hold $3.8tn in gold. That equals about 88.8% of the country’s GDP. Gold dominates household wealth.
China also drives global demand. It is the world’s largest single consumer market. Many buyers associate gold with good fortune.
Kavalis said demand often rises around Chinese New Year. He said a seasonal increase has already appeared. The Year of the Horse begins in February.
