Gold is experiencing its finest year in decades, achieving new record highs in 2025 and on track for its strongest annual performance since 1979. This surge is largely attributed to its historical role as a haven and a stable store of value, essential during times of economic uncertainty and geopolitical tensions. Current factors contributing to gold’s rise include fears of an economic slowdown, escalating tensions between Russia and NATO, and concerns surrounding former President Donald Trump’s economic policies, including his stance on the US central bank, trade wars, and fiscal plans.
Gold’s uniqueness as a store of value is highlighted by its scarcity. All gold ever mined would create a cube only 22 meters on each side, limited by an annual supply growth of just 1.7%. Unlike other metals like copper, platinum, and palladium, gold’s value is not easily influenced by industrial use or economic fluctuations. This scarcity and stability make it especially attractive when governments struggle to manage public finances.
Since January 1, the price of gold has soared by 45%, reaching a record high of $3,190 per ounce, surpassing other leading asset classes this year. In 1979, a similar surge occurred when geopolitical upheaval in Iran led to a significant oil price increase, boosting gold prices. Despite Bank of America’s suggestion that gold is currently “overbought,” it remains “under owned” relative to private client assets, prompting continued investment interest. Analysts, including Arnab Das from Invesco, predict that gold’s upward trajectory will persist, fueled by ongoing central bank purchases and a lack of alternatives to hedge against US risks.
Western investors and speculators are significant contributors to the recent price gains, motivated by expectations of further US Federal Reserve interest rate cuts and concerns about the US dollar’s stability amid political rhetoric. Central banks, particularly China, are also increasing their gold reserves to enhance their global bullion market standing and reduce dependence on the dollar.
The “Trump effect” has also played a role, with high US tariffs leading to a de-dollarization trend in markets, elevating gold’s appeal as a sanctuary asset. The US dollar has depreciated by over 9% this year amid worries over Federal Reserve independence and trade tensions, inadvertently boosting gold’s value in dollar terms.
This trend suggests that while markets face challenges, gold continues to be a reliable refuge for investors seeking stability amid economic and geopolitical turmoil.