Is now a good time to invest in gold?

Anyone who decided to invest in gold early in 2024 was well-rewarded, and the global instability that has kickstarted 2025 has continued the strong run for the yellow metal.

Gold prices increased 27.2% during 2024, driven by global uncertainty, particularly in light of the conflict in the Middle East and the run-up to the US presidential election, as well as gold purchasing by governments and central banks.

In 2025 to 10 March, gold prices gained a further 10.3%, putting paid to the notion that the gains for gold investors were over.

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For at least 6,000 years investing in gold has been seen as one of the surest ways of protecting wealth.

With UK inflation bouncing unexpectedly to 3% in January, well above the Bank of England’s 2% target, UK investors worried about the impact of inflation on their portfolios might be considering gold as one way of hedging against inflation.

"It's always a good time to buy gold," Adrian Ash, director of research at BullionVault, tells MoneyWeek. "That might be for diversification, as risk insurance, an inflation hedge, a long term bull market, or because every time the stock market has lost value over extended periods of time (which is when it matters), the price of gold has risen."

Gains over the past year have underscored the fact that investing in gold has the potential to provide a source of growth as well as to protect the value of a portfolio.

“There has apparently been some sustained buying of gold by the Chinese authorities in an effort to reduce their reliance on the US dollar amid the fractious relationship between the two countries,” says Richard Hunter, head of markets at Interactive Investor. “Other central banks have also been adding to their gold holdings.”

Can gold diversify your portfolio?

One of the advantages of investing in gold is that it offers better diversification from equities when compared with bonds in the current environment.

“When bond yields stand at today’s higher levels, shares and fixed income investments tend to track each other higher and lower,” Tom Stevenson, investment director at Fidelity International, tells MoneyWeek. “That reduces the incentive to own a mixture of both bonds and shares. And it means that investors need to look further afield, into commodities and property, to gain that portfolio balance.”

Gold, by contrast, is less correlated with stocks. While both the S&P 500 and gold prices have posted gains over the past 12 months, they have frequently moved in opposite directions.

While it is of course not guaranteed to persist, there is some rationale behind the relationship. Equities typically gain in value during market upturns, and decline during downturns. During these downturns, people aim to put their money into the safest store of value possible, and there are very few safer stores of value (historically speaking) than gold.

Ash notes, though, that over the past year gold and stocks have been positively correlated, at their strongest level since May 1971 – before the dollar came off the gold standard.

While BullionVault itself doesn’t make gold price predictions, it polls its customers for their views twice per year. The result of the most recent survey – in December 2024 – indicates that BullionVault customers expect the gold price to reach $3,070 by the end of 2025, implying an increase of 17.6% from the end of 2024.

How is Trump’s second term impacting gold investors?

Another reason that investing in gold continues to be so popular globally is the unpredictability that Trump’s second term is injecting into the markets.

“Gold investing has leapt as Trump 2.0 delivers exactly the policy chaos which the new President promised in the US election,” wrote Ash recently.

Having seemingly started a tariff-driven trade war with some of the US’ closest trade partners, Trump has put global investors on edge.

“Western investors are joining emerging-market central banks in buying gold as an all-weather hedge,” writes Ash. “Traders in all markets are now watching Truthsocial more closely than monetary policy.”

The weakness that Trump’s policies have caused for the US dollar has also spurred gold investing.

“US dollar weakness during [February] was one of the primary drivers of gold’s performance,” writes Juan Carlos Artigas, global head of research at the World Gold Council.

Is AI driving gold demand?

Often it’s the macroeconomic factors that determine the gold price, especially the rate of US inflation.

Gold is therefore often viewed as a commodity with no industrial applications, in contrast to silver which serves a multitude of important purposes in industry. Lots of investors in fact trade the two metals based on the gold-silver ratio which tracks the relative price of gold to silver. (At the time of writing, the gold-silver ratio is around 90; values above 80 have historically preceded strong rallies in the silver price.)

Gold is, though, an important raw material in some industries, one notable example being electronics. Gold is a superb conductor of electricity, and is therefore frequently used in high end electronic devices. There is almost certainly some gold in the device you’re using to read this article.

As prices rose between 2001 and 2011, electronics manufacturers sought ways to move away from gold, with demand for gold in electronics peaking in 2010.

However, according to the World Gold Council, artificial intelligence (AI) is helping to prompt a recovery in this market. The processors, memory chips and sensors which are being deployed at vast scale to build the data centres that train models like ChatGPT all use gold in their construction.

“Gold's superior conductivity ensures that data can be processed and transmitted at high speed with minimal energy loss,” wrote Louise Street, senior markets analyst and Trevor Keel, consultant, at the World Gold Council. “Furthermore, gold's resistance to corrosion ensures component longevity and durability – critical for continuous and intensive AI applications.”

Is now a bad time to invest in gold?

On the other side of the ledger is the fact that gold has seen a sustained period of gains, which might lead investors to consider if now is the right time to buy.

Gold prices have gained 33.4% in dollar terms over the past 12 months, outperforming the S&P 500 during that time. Gold is currently trading near its all-time highs – and “all-time”, for gold, goes back a long way.

"Gold's current record-breaking bull market has clearly pulled in speculative traders betting that these price gains will continue," says Ash.

Those who have held gold during this period could be tempted to take some profit on their gains by selling off a small portion of their allocation. Those who haven’t might feel that now isn’t the best time to dive in, given that gold is trading at almost the highest level in its history.

The caveat to this is that, over the millennia it has been traded, gold has consistently trended upwards over the long run. In other words, gold is often trading at all time highs, and when it drops below them, it usually comes back to exceed them again eventually.

Runs like these are never guaranteed to run into perpetuity, but in gold’s case, there is a lot of trading history to look at, and it mostly goes in one direction over the long term.

"For new investors, the price you missed doesn't matter. What counts for today's buyers is what gold's track record says it could do when the next crisis strikes,” says Ash.