Gold prices surged above $5,000 (£3,659) an ounce for the first time in history, extending a powerful rally. The precious metal has gained more than 60% during 2025, marking one of its strongest years on record.
The surge comes amid rising geopolitical and financial uncertainty. Tensions between the United States and Nato over Greenland have unsettled markets. Investors have also reacted nervously to global diplomatic strains and trade disputes.
US President Donald Trump has added to market unease through aggressive trade policies. Over the weekend, he threatened a 100% tariff on Canada. The move would apply if Canada signs a trade agreement with China.
Safe havens attract nervous investors
Investors often turn to gold during periods of instability. Many view it as a safe-haven asset when confidence in markets weakens. Silver has followed a similar path, topping $100 an ounce on Friday for the first time.
Silver prices built on gains of almost 150% last year. Other precious metals have also benefited from the same defensive investment flows. Demand has increased as investors seek protection from volatility.
Several economic factors have boosted demand for precious metals. Inflation has remained higher than usual in many economies. The US dollar has weakened, making gold cheaper for overseas buyers.
Central banks have also increased their gold purchases. Expectations that the US Federal Reserve will cut interest rates again this year have added support.
Wars and politics push prices higher
Ongoing wars have reinforced gold’s appeal. Conflicts in Ukraine and Gaza have heightened global uncertainty. Political events involving Venezuela have also unsettled investors.
These developments have encouraged investors to move money into tangible assets. Gold often benefits when confidence in political stability declines. Analysts say the metal reflects broader global anxiety.
Scarcity underpins gold’s long-term value
Gold’s limited supply remains one of its strongest attractions. About 216,265 tonnes have ever been mined, according to the World Gold Council. That volume would fill only three to four Olympic-sized swimming pools.
Most of that gold entered circulation after 1950. Advances in mining technology and new discoveries drove production growth. Despite this, future supply looks constrained.
The US Geological Survey estimates another 64,000 tonnes remain underground. Analysts expect global supply growth to slow in coming years. Many believe this will support prices long term.
A powerful diversifier in uncertain times
Market experts highlight gold’s independence from debt markets. Nicholas Frappell of ABC Refinery said gold does not rely on another party’s liabilities. Bonds and equities depend on issuers and company performance.
Frappell described gold as a strong portfolio diversifier. He said uncertainty across the world has increased its appeal. Investors value assets that sit outside traditional financial systems.
A blockbuster year for precious metals
Gold recorded its biggest annual gain since 1979 during 2025. Investors poured into precious metals amid repeated market shocks. Prices hit record highs several times during the year.
Concerns over trade tariffs and expensive artificial intelligence stocks drove demand. Many investors feared equity markets had become overheated. Gold benefited from those fears.
Susannah Streeter of Wealth Club said gold appears unstoppable amid political turmoil. She said investors continue piling into the traditional safe haven. Trade tensions have repeatedly unsettled financial markets.
Interest rate cuts fuel demand
Gold prices often rise when investors expect lower interest rates. Rate cuts reduce returns on bonds and similar assets. Investors then seek alternatives like gold and silver.
Markets expect the US Federal Reserve to cut rates twice this year. Analysts say falling yields increase gold’s relative attractiveness. Opportunity costs of holding bonds have fallen sharply.
Ahmad Assiri of Pepperstone said investors shift away from government debt. He said gold benefits when bond returns no longer compensate investors. Many choose metals instead.
Central banks shift away from the dollar
Central banks have played a major role in recent demand. They added hundreds of tonnes of gold to reserves last year. The World Gold Council reported strong official sector buying.
Analysts see a clear move away from the US dollar. Kavalis said this shift has strongly supported gold prices. Many countries want to reduce reliance on dollar assets.
Despite the rally, some warn prices could still fall. Frappell said the market reacts heavily to news. Unexpected positive developments could weaken gold’s appeal.
Cultural demand remains strong
Investment demand is not the only driver. Gold holds deep cultural significance in many societies. People often buy it during festivals or major life events.
In India, families traditionally purchase gold during Diwali. Many believe the festival brings wealth and good fortune. Gold gifts remain common at weddings and celebrations.
Morgan Stanley estimates Indian households hold $3.8tn worth of gold. That equals about 88.8% of the country’s GDP. The metal plays a central role in household wealth.
China also represents a major source of demand. The country is the world’s largest single consumer market for gold. Many buyers associate gold with luck and prosperity.
Kavalis said demand often rises around Chinese New Year. He said a seasonal uptick is already visible. The Year of the Horse begins in February, supporting buying interest.
