Safe haven, tight supply: Why gold prices continue to scale new highs

Gold has surged past $5,000 an ounce as geopolitical tensions, trade uncertainty, expectations of lower US Fed interest rates and sustained global central bank buying combine to support prices

For millions of people buying gold, whether as jewellery, a long-term saving or a hedge against uncertainty, the price tag has rarely looked as haunting as it does now. From families planning wedding purchases to investors tracking daily price moves, the metal’s steady climb is becoming increasingly harder to ignore each passing day. Gold has now crossed $5,000 an ounce for the first time, marking a rally of more than 60 per cent in 2025. The dramatic surge is unravelling against a backdrop of continued geopolitical strain, economic uncertainty and shifting global investment behaviour

 

How are geopolitics and US policy influencing gold prices? 

The recent tensions between the United States (US) and Nato, because of Greenland, have created market uncertainty, which has increased the demand for investments that people consider safe during times of political instability. Additionally, concerns have also grown around US trade policy after President Donald Trump threatened to impose a 100 per cent tariff on Canada if it enters into a trade agreement with China.

 

The precious metal’s rally began with ongoing wars in Ukraine and Gaza, which have continued to weigh on investor sentiment. In addition, actions by Washington against Venezuelan President Nicolás Maduro have contributed to broader geopolitical uncertainty. Analysts are of the opinion that such developments tend to drive investors towards gold, which is widely viewed as a hedge or ‘safe haven’ during periods of global instability.

 

Why do investors turn to gold during uncertainty? 

Gold functions as a "safe-haven" asset because its value does not depend on the economic performance or financial obligations of governments and corporations (like bonds or equities).

 

Brokerages note that when someone owns gold, it’s not attached to the debt of somebody else, like a bond is or an equity, where the performance of a company will drive performance and thus becomes a really good diversifier in an uncertain world.

 

This perception has helped gold post its strongest annual gain since 1979, as investors moved away from assets seen as vulnerable to policy shocks and market volatility.

 

 

What role do interest rates and inflation play? 

Expectations of lower interest rates have also supported gold prices. The US Federal Reserve is widely expected to cut its main interest rate twice this year, according to a BBC report. Lower rates reduce returns on assets, which include government bonds. This situation makes non-yielding assets like gold more attractive to investors. The current economic situation, where the US dollar has weakened and inflation rates are above normal levels, has made gold more attractive to investors, reinforcing its value as a secure investment.

 

On the other hand, central banks around the world have increased their gold purchases in recent times as well. According to the World Gold Council, they added hundreds of tonnes of bullion to their reserves last year, marking a clear shift away from the US dollar. This diversification trend has provided steady demand for gold alongside investor buying.

 

 

Does limited supply matter? 

One important long-term reason behind the rally of gold remains its physical scarcity. Around 216,265 tonnes have been mined globally, according to the World Gold Council, which, in simple, understandable terms, means that it is enough to fill between three and four Olympic-sized swimming pools. The US Geological Survey estimates that about 64,000 tonnes remain underground, though production is expected to level off in the coming years.

 

Meanwhile, gold demand is also affected by cultural and seasonal factors. For example, in India, buying gold during festivals such as Diwali is considered auspicious. According to a recent Morgan Stanley estimate, Indian households hold $3.8 trillion worth of gold, equivalent to nearly 89 per cent of the country’s GDP.

 

China, the world’s largest single consumer market for gold, typically sees higher demand around the Lunar New Year, with buying often linked to beliefs around good fortune.

 

Together, these factors have kept gold prices high, but analysts caution that the rally still remains sensitive to shifts in global news and policy signals.