The price of gold continues to languish, with the prospect of a renewed rally falling as the yellow metal slumped in late August and early September.
The price of gold rose 16.5% in the 12 months to 22 September; however, since the start of 2026 it has gained just 1.1%. Since reaching an all-time high of $5,595 per troy ounce on 29 January, the price of gold is down 22%.
While gold is typically viewed as a safe haven during times of crisis, its gains during 2025 made gold holdings an obvious asset for liquidity-hit investors to sell once the conflict in Iran broke out at the end of February.
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The selloff didn’t start with the conflict in Iran, but rather Trump’s nomination of the relatively hawkish (favouring tighter monetary policy and relatively higher interest rates) Kevin Warsh as chair of the Federal Reserve (Fed), the US central bank.
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Due to rising inflation and a sturdy US economy, Warsh paused interest rate cuts this year then raised rates by 25 basis points in September.
“We saw a more hawkish stance from the Fed… the dollar strengthened and rates moved higher,” said Aneeka Gupta, director of macroeconomic research at asset manager WisdomTree. “That reduced the positive tailwinds that were helping the gold market.”
However, given the declines in gold prices since then, Gupta believes the outlook for gold is now looking more positive.
The World Gold Council, an industry body representing global gold miners, identified a 411% increase in gold demand from central banks between the first and second quarter of the year.
“Central bank purchases of gold have essentially provided that very important floor for gold prices,” said Gupta. “We continue to see Poland and China increase their purchases of gold."
What is holding gold prices back?
Since gold is priced in dollars, its performance is often inversely correlated with dollar strength.
Since Warsh’s appointment as Fed chair, gold prices have struggled, and this has been exacerbated by the impact of the conflict in Iran, since both raise expectations for higher US rates (to combat higher inflation) in future.
Higher US rates typically mean a stronger dollar.
US intervention in the bond market during August caused a temporary surge in gold prices, but the gains have been short-lived.
The price of gold fell 5.2% in the month to 22 September, as Middle East peace talks proved unproductive and the Fed raised interest rates.
It remains to be seen how enduring this hawkish stance could be.
“We don’t believe the Fed is embarking on a new tightening cycle,” said Gupta. “Rather, in our opinion, it appears to be reversing part of the easing that was delivered back in 2025.”
One possibility is that, while Trump is reluctant to appear weak before the midterm elections in November, he might be more willing to reach a deal to end the war after they have passed.
If so, “that should lead to a moderation in energy prices, that could reduce pressure on the Fed to tighten further”, said Gupta. “That could alleviate some of those headwinds that gold has been facing in terms of real interest rates increasing.”
WisdomTree’s internal modelling forecasts that the gold price could recover to $5,000 by Q3 2027.
How to gain exposure to gold prices
If you are considering where to invest and want to add some gold exposure, there are three main approaches.
The first one is investing in the metal itself through a financial contract, such as an exchange-traded fund (ETF) or exchange-traded commodity (ETC). Gold ETFs can be a particularly straightforward approach for beginner investors.
You can also get indirect exposure by investing in the miners that dig gold out of the ground. This can be done by investing directly in their shares, or by buying a gold fund or investment trust.
Lastly, you can buy physical gold bars or gold coins.
In terms of how much gold to hold in a portfolio, Tom Stevenson, investment director at Fidelity International, suggests around 5-10% – which is about the same as you might hold in cash.
“The two offer insurance and dry powder to complement the growth and stability of the shares and bonds that make up the bulk of a balanced portfolio,” he said.
