Gold has been achieving record highs recently, with the spot gold price reaching $3,357.40 (£2,532) per ounce for the first time on Wednesday.
This increase of approximately $700 (£528) this year coincides with significant uncertainty surrounding Donald Trump’s tariffs on imports to the US.
This surge is not a coincidence.
This is because gold is a physical commodity – a tangible good that can be traded.
Following a sharp rise in the previous session, gold prices dropped by more than 1% on Thursday as investors took profits ahead of the long Easter weekend.
The open pit gold mine of Goldcorp in Penasquito, Mexico. Pic: Reuters
Approximately 3,000 tonnes of gold are mined annually, with China leading gold production in 2024, followed by Russia, Canada, and the US.
The Bank of England holds the world’s second-largest known gold reserve, with around 400,000 gold bars valued at billions of pounds stored in its vaults.
So why is the value of gold increasing?
Gold is seen as a ‘safe haven’
Gold is considered a “safe haven” asset – an investment that typically holds or increases in value during times of market instability or economic uncertainty.
Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh. Pic: Reuters
During periods of market volatility, investors tend to seek safe havens to protect their investments from losses.
Therefore, it’s not surprising that gold’s value has surged as global markets have been rattled by the implementation and subsequent reversal of some US tariffs.
“Gold continues to be well-supported due to a weak dollar, uncertainty surrounding tariff decisions, and concerns about a global recession,” stated Lukman Otunuga, senior research analyst at online trading broker FXTM.
Managing director Brian Lan of Singapore-based dealer GoldSilver Central added: “As long as there’s uncertainty, gold will remain strong.”
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Gold saw a similar surge at the beginning of the COVID-19 pandemic, but its value has been on an upward trajectory for years.
Popular investment, yet not without risks
Supporters of gold investment argue that it can diversify and stabilize investment portfolios, as well as hedge against potential risks in the future.
Some investors find comfort in purchasing a tangible asset that has the potential to increase in value over time and is not directly linked to global currencies.
However, skeptics of gold investment caution individuals to be prudent.
The Commodity Futures Trading Commission has previously warned about the high volatility of precious metals, as prices rise with increased demand – meaning that “during periods of economic uncertainty or instability, sellers typically profit from precious metals”.
The Commission recommends that if you decide to invest in gold, it’s crucial to educate yourself on safe trading practices and be wary of potential scams and counterfeit products on the market.
While the tangibility of gold as a currency is generally viewed as a positive aspect, it also means that it can be depleted; some analysts estimate this depletion could occur in less than three decades.
You can learn more about the implications of a gold shortage here.