Following a standout year in 2024, the gold price continues to glitter in 2025 as the yellow metal reaches new highs.
The rush to invest in gold that sent gold prices soaring during 2024 has continued during the opening months of the year, with gold posting successive new milestones already.
Having broken through the $2,900 barrier for the first time earlier in the month, the price of gold reached $2,954.97 on 20 February. At time of writing (21 February), it has since fallen back slightly, but gold prices are still up 10.4% this year and 44.8% over the past 12 months.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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
“The target of $3,000 is very much in sight and, as we know, when times are uncertain, investors flock to safe-haven assets such as gold to hedge,” says Prem Raja, head of trading floor at Currencies 4 You.
Over the past five years, the gold price has increased by more than 78%.
With bars of gold bullion typically weighing about 400 ounces, current gold prices mean that each bar is now worth more than $1 million.
The catalyst for gold prices to reach their latest high was the news that US president Donald Trump will impose tariffs of 25% on imports of steel and aluminium.
For weeks prior to that, though, fears of resurgent inflation have driven investors towards the yellow metal. While UK interest rates fell in February, the Federal Reserve seems to have ended its cutting cycle in the US in an attempt to ward off resurgent prices.
Fears of a global trade war and rising inflation add upward pressure to the price of gold, which is often seen as a safe haven asset in times of disruption as well as a hedge against inflation. “It's a perfect storm for gold,” says Faisal Sheikh, managing director at Monmouth Capital. “Trump's tariffs, if enacted in a serious manner, are likely to cause inflation, at the same time as increasing uncertainty, both catalysts for demand for gold."
With so much economic and geopolitical uncertainty around, it’s small wonder many investors believe that now is a good time to invest in gold.
Central banks have also been buying up gold, especially in countries like Russia and China, which has helped inflate the price. Meanwhile, the metal is increasingly being used in other industries like nanotechnology and artificial intelligence (AI), as well as in cancer therapy and to fight malaria.
We take a closer look at the reasons behind the global gold rush, before delving into whether more rises are on the horizon.
Why is the gold price rising?
There are three fundamental factors that have driven the gold price rally since 2024: interest rates, central bank purchases, and geopolitical uncertainty.
Interest rates
History suggests the gold price does well when interest rates fall.
This is because central banks typically cut interest rates in an attempt to encourage growth when the economy is stagnating. Stock markets usually struggle in periods like this, so gold can be a good hedge.
“Gold, which pays no interest, becomes more attractive in a low interest environment”, says Josh Saul, chief executive of The Pure Gold Company.
The Fed’s rate-setting decisions are particularly important in determining the gold price – more important than the decisions made by other policymakers like the Bank of England, for example.
Last year, “Western investors flocked back to gold as central banks started cutting interest rates,” says Juan Carlos Artigas, global head of research at the World Gold Council.
Central bank purchases
Central banks buying up gold is also causing the price to soar, with unprecedented purchases from emerging markets like China and India, as they hedge against global economic fragmentation.
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-dollarization.”
“The importance of gold in foreign reserves is well recognised,” says Artigas, for “the role it plays as a long-term store of value, as a diversifier, its performance in times of crises, and the fact that it does not carry credit risk.”
Central bank gold purchases exceeded 1,000t for the third year in a row in 2024.
“In 2025, we expect central banks to remain in the driving seat and gold ETF investors to join the fray, especially if we see lower, albeit volatile interest rates,” writes Louise Street, senior markets analyst at the World Gold Council.
Demand for gold could be driven further by a pilot program in China that allows the country’s insurers to buy gold for the first time. Bloomberg cites Minsheng Securities Co’s estimate that this could add approximately $27 billion worth of new gold demand into the market.
Geopolitical uncertainty
Interest rates aside, other factors on the global stage are also driving the gold price. The yellow metal is considered a safe-haven asset, so investors often flock to it during periods of conflict in an attempt to escape market shocks.
“While the truce is holding in Gaza for now, tensions are still high in the Middle East and the war in Ukraine remains intractable,” says Susannah Streeter, head of money and markets, Hargreaves Lansdown.
Layer Trump’s apparent determination to disrupt global trade as much as possible on top of this, and the geopolitical outlook makes it understandable that demand for gold is rising.
How has DeepSeek impacted the gold price?
On 27 January the stock market, particularly the Magnificent Seven, experienced a shock when DeepSeek, a Chinese generative AI start-up, announced that it could outperform OpenAI’s ChatGPT having spent less than $6 million on its final training run, and without relying on high-performance GPUs.
Investors fled the big tech stocks, in search of safer places to put their money.
“The gyrations on stock markets, caused by progress made by Chinese AI rival DeepSeek, which has potentially threatened the dominance of Silicon Valley, may also have helped gold’s glittering run upwards this week,” said Streeter, as gold neared a new high on 30 January.
Will gold continue to rally?
It’s always impossible to predict the future with certainty, however there are reasons to think that gold’s rally could continue this year.
“Market consensus suggests that the Fed will deliver 100 basis points in cuts by year end, with inflation softening but still above target,” says Artigas. “The US dollar is expected to remain flat or slightly weaken as conditions normalise, while global growth remains positive but continues to grow below trend.
“In this context, the actions of the Fed and the direction of the US dollar will continue to be important drivers for gold.”
However, he adds that there are wider factors at play that influence the gold price, including economic expansion, risk, opportunity costs (particularly compared to bond investments), and momentum.
Factoring all these influences in, Artigas and the World Gold Council expect gold price performance in 2025 to be “rangebound, with slight upside”.
Other observers are less tentative in their bullishness. Goldman Sachs’ gold price outlook sees the yellow metal clearing the $3,000 mark by the end of 2025.
Similarly, Eric Strand, founder and CEO of AuAg Funds, said in the HANetf’s 2025 outlook that the inflationary cocktail will send the gold price above $3,000 during the year, and perhaps as high as $3,300.
Looking longer term, gold prices could leave the $3,000 threshold in the rear-view mirror. “Once $3,000 has been breached we will then have to re-assess,” says Raja. “$4000 is a great longer term target but the first target has to be hit first."
Ways to get exposure to gold
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.
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 of personal investing at Fidelity International, suggests that 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.
Streeter cautions that, as with all investments, gold prices can go up as well as down.
While gold has “often risen in times of economic or political crisis”, she says, “it has also a history of losing its lustre. After a strong run in the ‘70s and early ‘80s, it took over 23 years to get back to its 1983 high.
“Given the volatility associated with gold, it usually should only make up a small portion of a diversified investment portfolio.’’
