Why Is The Price Of Gold Rising So Quickly?

The price of gold, which has been on a steep upwards trend over the past few years, hit a record price of over $4,600 an ounce this week, setting another record after an already big year.

But why is gold in such high demand? And what is causing this steep upward trend?

Gold As A Safe Haven

When it comes to assets for investing in, gold has always been seen as a ‘safe haven’. When people feel worried about the economy or political systems around them, they want their money to be invested in assets that they think will hold their value regardless.

Gold falls under this because its value isn’t influenced by profits, banks or governments. It just exists, and that is what makes it so attractive.

Over the past year, it seems like uncertainty has been a global theme.

Politics around the world has been more volatile, tensions in Europe and the Middle East grew and Trump’s leadership style and the division growing in the US means investors are becoming increasingly cautious.

As the US is the centre of the world’s financial system, any uncertainty on that side of the world usually shifts the markets a little.

Rajan Lakhani, personal finance expert and Head of Money at Plum, stated: “Gold has hit a fresh high following the launch of a criminal investigation into Federal Reserve chair Jerome Powell, as well as geopolitical tensions and concerns over debt sustainability, fuelling the ongoing debasement trade. This backdrop has led to gold once again becoming a ‘Safe Haven’ asset where investors feel their money will at least hold in value or hopefully rise.

“It’s little surprise that the asset is continuing to thrive – it’s in fact been the best performing mainstream asset since 2000. Those looking to invest in gold now should know that it often works best as part of a diversified portfolio, but it depends on how much risk you’re comfortable with. And gold doesn’t pay you money while you hold it. Unlike a high-interest savings account or a bond, gold only makes money if the price goes up and you sell.

“As with any investment, never deposit money you might need in the immediate future or aren’t prepared to lose.”

The US Dollar Continues To Fuel Concerns

One of the biggest reasons behind gold’s surge is worries around the US dollar. Gold is priced in dollars, and when the dollar gets weaker, gold usually rises. This is because it becomes cheaper for foreign investors to buy it, so more pile in whilst it’s on ‘sale’.

This largely explains gold’s recent rally. The dollar has lost a bit of momentum this year, mainly due to recent clashes between President Donald Trump and Fed chair Jerome Powell.

Historically the Fed has existed to help balance interest rates in the US, without political affiliations, however Trump has openly criticised and threatened legal action against the Fed, drawing investors even closer to that ‘safe haven mentality’.

Lower Interest Rates Also Play A Role

 
Interest rates also play a big role in the price of gold. When interest rates are high, investors can earn a decent return just by keeping money in savings accounts or bonds. Gold, which pays no interest, looks less appealing.

But if rates are looking like they might be heading downwards, or if people think that the rate of inflation is higher than the returns other investments may give them, then gold suddenly looks more attractive.

Central Banks Are Also Buying More Gold

Interestingly, it’s not just investors driving the rally. Central banks around the world have been buying a lot of gold, especially emerging economies like China and Russia.

These countries are trying to ‘de-dollarise’, which essentially means that they are making a decision to rely less on the US dollar. Historically, the US dollar has been a currency held by banks as part of their foreign exchange reserves due to its perceived stability. However, as governments have become more able to freeze or restrict use of assets, countries are looking at other options, which is why gold, which retains value but comes with no political risk, is so appealing.

ETFs Have Made Gold Easier To Buy

Another factor at play is how easy it has become for everyday people to buy gold.

In the past, owning gold meant having to buy physical bars or coins and finding somewhere to store them. Today, ETF platforms allow people to buy a ‘share’ of gold digitally, with just a few clicks.

This accessibility has made gold even more coveted, as more investors price in, demand goes up and so does value. This has helped gold climb to higher levels than many have expected over the past few years.

Will Gold Keep Rising?

Ah, the ‘golden’ question – will gold keep up its momentum? Many analysts say yes. After all, central banks are buying it and political uncertainty doesn’t seem to be getting any better in 2026.

Some have even predicted that gold could be worth $5,000 an ounce over the next year or two.

To put it simply, gold is rising because people are nervous. When people feel like their money isn’t safe from political tensions and economic fluctuations they look for a safe haven, and gold provides exactly that.