Gold price falls: is the rally over?

Gold prices fell 5.5% in the five days to 14 May, as global instability that had driven an extended gold rally shows signs of settling down. Is the gold price rally over?

Over the past six months, the price of gold has risen 22.4% – 35.9% over the past year – peaking at over $3,400 along the way. The drivers for the gold price rally were multifaceted, but one of the most important, especially in recent months, has been increased uncertainty over the global economy in the run-up to and wake of Donald Trump’s ‘Liberation Day’ tariffs.

That drove a global rush to invest in gold, which is often seen as a safe-haven asset. Gold prices surged, gaining 18.5% between 3 March and 6 May. Over the same period, the S&P 500 index fell 4.15% (though at one point during this period, it was down by more than 14%).

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The gold price briefly broke through the $3,500 barrier during April, putting the price of gold at around double the price it traded at during 2022.

“Gold is seen as a safe haven during times of geopolitical and financial uncertainty and attracts buyers when the outlook is unclear, despite its lack of income,” says Tom Stevenson, investment director at Fidelity International.

However, that uncertainty is starting to unwind. News of improved US-China trade relations broke on 12 May, including a temporary pause on the triple-figure tariffs both nations were charging each other in the aftermath of Liberation Day.

The S&P 500 gained around 4% in the two sessions following that announcement, as fears of a global downturn or a US recession subsided.

But just as rising uncertainty and stock market declines led to gold price increases, the inverse is true, and the price of gold now appears to be falling.

Is the gold price rally over?

Gold is an inherently volatile commodity. Its price movements are closely correlated with global macroeconomic changes and, as such, it’s reasonable to expect volatility.

According to Peter Walden, director at BullionByPost, a dip in the gold price like the one we’ve seen recently “is often the spark for renewed interest, especially among investors seeking stability amid global uncertainty”.

In Walden’s view, the price dip presents a buying opportunity for investors who had been nervous about buying gold while prices were rising. BullionByPost – a gold and silver bullion dealer – notes growing interest in gold from first-time buyers.

Walden further highlights the impact of a weakening dollar on the gold price. “Gold hasn’t weakened – currencies have fluctuated,” he says. “Many investors see gold as a benchmark of value. When its price rises, it's often a reflection of currency devaluation, not a loss or gain in gold’s intrinsic worth.”

Which factors are pushing the gold price up?

While the latest catalysts that pushed the gold price up (tariffs) have subsided, at least for now, many of the prime movers behind the gold price rally remain.

During 2024, falling interest rates, central bank purchases and geopolitical uncertainty gave gold momentum. So far, 2025 has continued these trends, and despite the temporary pauses on tariffs, there is still a great deal of uncertainty over the long-term outlook for trade and the global economy.

“The biggest drivers of the gold price movements so far have been continued geopolitical risk combined with declining yields,” Stephen Mullowney, CEO and director at TRX Gold Corporation, tells MoneyWeek.

“There are also ongoing concerns that governments across the world have piled up high levels of debt, which is associated with a rise in long-term inflationary expectations,” says Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Central banks are continuing to buy gold against this backdrop. Central bank gold purchases exceeded 1,000 tonnes for the third year in a row in 2024.

Anita Wright, independent financial adviser at Bolton James, notes: “Central banks, particularly in countries like Russia, China, India and Turkey, have dramatically increased their gold purchases, reflecting growing mistrust in the US dollar. This trend is further fuelled by the countries accelerating their efforts towards de-dollarisation.”

There is also an increase in gold demand from European investors this year.

“There is one key difference between the rally this year and last year: European investors have joined the party,” says Tom Bailey, head of research at HANetf. “Despite the strong performance of gold in 2024, European investors pulled a total of $5.8 billion out of gold-backed exchange-traded commodities (ETCs) over the course of the year.

“This year has seen a dramatic reversal. So far, European investors have poured over $3.2 billion into gold ETCs.”

How to gain exposure to gold prices

There are three main ways to invest in gold. The first one is investing in the metal itself through a financial contract, such as an exchange-traded product. 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. Note that gold miners don’t always rise with the gold price, as other company-specific factors are at play.

Lastly, you can buy physical gold bars or gold coins.

In terms of how much gold to hold in a portfolio, Stevenson suggests around 5-10% is a good amount – 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 comments.