Gold prices surged above $5,000 (£3,659) an ounce for the first time, extending a historic advance. The precious metal has risen more than 60% during 2025, marking an exceptional surge.
Escalating geopolitical and financial tensions have driven the rally. Disputes between the United States and Nato over Greenland have unsettled investors. Markets have reacted nervously to mounting global instability.
US President Donald Trump has increased uncertainty through aggressive trade policies. He recently threatened a 100% tariff on Canada. The warning applies if Canada signs a trade agreement with China.
Investors flood into classic safe havens
Investors typically buy gold during periods of instability. Many view it as protection against market shocks and political risk. Silver has mirrored the trend, pushing beyond $100 an ounce.
Silver extended gains of nearly 150% from last year. Other precious metals have also attracted strong demand. Investors have shifted funds away from risk-sensitive assets.
Economic pressures have strengthened the move. Inflation has remained high across major economies. A weaker US dollar has boosted overseas demand for gold.
Central banks have continued increasing gold reserves. Expectations of further US interest rate cuts have added momentum.
Wars and politics heighten uncertainty
Ongoing conflicts have lifted gold prices. Fighting in Ukraine and Gaza has intensified global anxiety. Political actions involving Venezuela have further shaken confidence.
These developments have driven demand for tangible assets. Gold often benefits when trust in political systems weakens. Analysts say prices reflect widespread concern.
Scarcity underpins long-term appeal
Gold’s limited supply remains a key attraction. About 216,265 tonnes have ever been mined, according to the World Gold Council. That amount would fill three to four Olympic-sized swimming pools.
Most gold entered circulation after 1950. Advances in mining technology expanded output. Even so, future supply growth now appears limited.
The US Geological Survey estimates 64,000 tonnes remain underground. Experts expect production to plateau in coming years. Many believe scarcity will support prices.
An asset free from counterparty risk
Analysts highlight gold’s independence from financial liabilities. Nicholas Frappell of ABC Refinery said gold carries no counterparty risk. Bonds and equities rely on issuers and company performance.
Frappell described gold as a powerful portfolio diversifier. He said uncertainty has increased its relevance. Investors value assets outside traditional finance.
A standout year for precious metals
Gold delivered its strongest annual gain since 1979 during 2025. Investors flocked to precious metals amid repeated market shocks. Prices reached record highs several times.
Concerns over trade tariffs and expensive technology stocks drove demand. Many investors questioned equity market valuations. Gold benefited from those fears.
Susannah Streeter of Wealth Club said gold continues surprising markets. She said political uncertainty keeps demand strong. Trade tensions have repeatedly unsettled investors.
Interest rate expectations drive momentum
Gold often rises when investors expect lower interest rates. Reduced rates shrink returns on bonds. Investors then seek alternatives like gold and silver.
Markets widely expect two US rate cuts this year. Falling yields weaken 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 choose metals instead.
Central banks reshape reserve strategies
Central banks have played a major role in the rally. They added hundreds of tonnes of gold to reserves last year. Official sector buying has remained 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 remain. Frappell warned that news-driven markets can reverse quickly. Positive global developments could pressure prices.
Cultural traditions sustain global demand
Gold demand extends beyond investment markets. Many cultures value the metal for tradition and celebration. Families often buy gold during festivals and weddings.
In India, Diwali remains a key buying season. Many believe gold brings prosperity and luck. Gold gifts remain common.
Morgan Stanley estimates Indian households hold $3.8tn worth of gold. That equals about 88.8% of national GDP. Gold dominates household wealth.
China also plays a central role in demand. It stands as 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.
