Can the gold price rally following a lacklustre April?
The price of gold made little ground over the last month, and experts warn that it could be a tough period for the yellow metal over the short term.
Gold prices fell 0.1% in the month to 8 May, despite some ups and downs in April, with the precarious geopolitical situation in the Middle East continuing to weigh on the yellow metal’s price.
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.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
“Gold is often considered to be a haven in troubled times, but what many people don’t realise is that its price can still drop in a falling market,” said Dan Coatsworth, head of markets at AJ Bell. “Investors often sell what they can in the face of trouble, and gold is a liquid asset.”
In light of the impact of the war in Iran, can gold prices rally further this year, or are more falls in store?
What influenced the gold price during April?
Several factors led to the price of gold falling after the US/Israeli war with Iran broke out, besides the aforementioned liquidity rush that set in at the start of the conflict.
Gold is priced in dollars, and had therefore been benefitting from a weaker dollar prior to the outbreak of the war. Because the US is a net exporter of oil and therefore a potential beneficiary of rising oil prices relative to other countries, the dollar rose during the conflict, pushing gold prices down.
Greater inflationary expectations also reduced the chances of central banks cutting interest rates. Hawkish central bank policy, particularly in the US, is typically negative for gold prices because higher rates increase the appeal of bonds compared to gold, which pays no income.
The temporary ceasefire announced in April provided some respite for gold prices.
“The earlier selloff was driven by an unwind in crowded positioning, alongside a stronger dollar and higher yields,” said Lale Akoner, global market analyst at investment platform eToro. “As those pressures eased, with the dollar weakening and yields moving lower, gold has recovered, with the ceasefire contributing to a broader recalibration in risk sentiment.”
That optimism saw gold prices rise as high as $4,890 on 17 April, but since then gold prices have sunk back to below $4,700 as the ceasefire failed to lead to a more lasting peace.
Could gold prices rise in future?
The future trajectory of the gold price depends fundamentally on how quickly oil supplies could return to pre-war normality.
If the oil price remains elevated, it could materially impact global inflation. Normally, that would be beneficial for gold prices, though if this coincides with further strength in the dollar then that impact could be mitigated.
While the Middle East crisis remains unresolved, the World Gold Council, an industry body representing the gold industry, highlights that markets appear to be taking its effects in stride for the moment.
“This presents a quandary for investors: a major geopolitical crisis is unfolding, but the triggers to tactically shift into gold seem absent,” said Johan Palmberg, senior quantitative analyst at the World Gold Council. “There is a tug-of-war between short-term pressure and longer-term structural support.”
While long-term drivers of higher gold prices, such as strong central bank demand, remain in place, the outlook for gold prices in the short term is not encouraging: US equities have performed strongly and elevated earnings expectations for next year, as well as tighter fiscal policy from central banks, could diminish the relative appeal of gold.
“Absent a fresh catalyst, this could remain a weak period for gold,” said Palmberg.
Think you know your gold? Test your knowledge in our gold quiz here.
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).
See our article on the best gold ETFs for more information.
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 says.
