Gold’s record-breaking rally has soared past $2,870 per ounce, fuelled by central bank purchases, inflation concerns, and deglobalisation fears. Trade tariffs imposed by the Trump administration are further amplifying demand for safe-haven assets.
Gold’s relentless rise has stunned markets, shattering price records and climbing nearly 10% since the start of the year, a pace of growth not witnessed since 1980 over the same time frame, leaving investors questioning whether this rally signals the dawn of a new gold era.
As central banks speed up purchases and geopolitical tensions fuel demand for safe-haven assets, many are wondering whether this is the beginning of a new era for gold.
On Wednesday morning trading in Europe, gold surged above $2,870 (€2,780) per ounce, continuing its impressive rally as investors – particularly central banks – flocked to bullion amid growing economic uncertainty.
While gold typically benefits from a weaker US dollar, falling Treasury yields, or expectations of Federal Reserve interest rate cuts, this time, the rally appears to be fuelled by deeper structural forces.
A perfect storm of debt, inflation, and deglobalisation
Otavio Costa, macro strategist at Crescat Capital, said that “the world is experiencing a real-time history lesson on the significance of gold”.
According to Costa, several macroeconomic forces are pushing gold higher, highlighting a combination of factors reminiscent of past economic crises.
Government debt levels have reached historic highs, echoing the debt problem of the 1940s while inflationary pressures are mounting in a way that resembles the challenges of the 1970s.
Meanwhile, extreme asset valuations in equity markets bring back memories of the financial excesses of the 1920s and 1990s.
With the US fiscal deficit widening and G7 economies entering a period of manufacturing revitalisation and deglobalisation, gold is increasingly considered to be a hedge against financial instability.
Central banks lead the charge, tariff jitters compound the rush
A key factor behind gold’s bullish trend is the unprecedented pace of purchases by central bank.
In 2024 alone, central banks acquired more than 1,000 tonnes of gold for the third consecutive year, with buying accelerating sharply in the fourth quarter to 333 tonnes, according to the latest World Gold Council report.
“Global reserve allocations to gold have doubled over the past 10 years, and this is likely to be an ongoing trend given concerns around US fiscal sustainability and geopolitics”, said Callum Thomas, head of research at Topdown Charts.
According to Goldman Sachs estimates, since the freezing of Russia’s central bank assets in 2022, global central bank demand on the London over-the-counter market has surged fivefold, reflecting growing fears of potential financial restrictions.
Goldman Sachs remains bullish on gold, maintaining its long position as its “highest conviction trade” across commodities.
Buyers remain bullish
“We continue to see value in long gold positions as a hedge against several tail risks, such as tariff escalation, geopolitical oil supply disruptions, and debt fears,” said Samantha Dart, commodities analyst at Goldman Sachs.
Tariff concerns are particularly relevant, given recent developments.
US President Donald Trump announced a 10% tariff on imports from China, which took effect on 4 February.
In response, China has imposed countermeasures, including tariffs on US goods, export bans on critical minerals, and antitrust probes.
Goldman Sachs economist Jan Hatzius expects these trade tensions to escalate, potentially adding another 20 percentage points to tariffs on Chinese imports and a new tariff on car imports from the European Union.
Is London running out of gold?
Amid gold’s price surge, reports have emerged of disruptions in the London gold market, with traders scrambling to borrow bullion from central banks as shipments to the US see a spike.
Reuters reported last week that the Bank of England, which stores gold for central banks, is experiencing withdrawal delays of up to four weeks – far longer than the usual few days.
This rush stems from traders hedging risks on the COMEX exchange and capitalising on a price premium between US futures and London spot prices.
However, Ross Norman, CEO at Metals Daily, dismissed concerns: “The situation is temporary and mainly a logistical reshuffling, not a fundamental shortage of gold.”
Gold is being moved from London to New York via Switzerland because US buyers require smaller kilobars instead of the standard 400-ounce bars. Swiss refineries are busy converting the gold, which has caused delays but is a normal process in the gold market.
Norman believes the concerns have been overblown. “My first thoughts are – OK, to put that into perspective, that’s actually about a couple of average trading days’ volume or turnover for the London gold market – interesting, but only maybe,” he said.
London still holds about 8,710 tonnes of gold, according to London Bullion Market Association vault statistics. While 435 tonnes have moved to New York, this remains a fraction of the overall supply.
Is silver the next big trade?
While gold is making headlines, silver could be the under-the-radar trade with strong potential upside.
Unlike gold, silver has significant industrial applications, making it behave like a hybrid between a precious metal and an industrial commodity.
Callum Thomas believes silver is currently undervalued relative to gold and could benefit from an expected reacceleration in global industrial production this year.
“Base metals and growth-sensitive commodities are likely to benefit significantly from that, and thus silver should see some macro tailwinds,” he said.
Is there room for gold to run higher?
Despite gold’s rapid ascent, some indicators suggest the rally is far from over.
Unlike previous gold bull markets, exchange-traded fund flows remain muted, retail investors have low allocations, and media coverage has yet to reach euphoric levels—signs that sentiment is not yet overheated.
Thomas said that his data shows ETF outflows, low retail investor allocations, and media apathy, which suggests there is still room for gold to extend its gains.
With both structural and cyclical factors still in play, gold’s bull market appears well-supported for now.
Whether this is the start of a sustained new gold rush or just another cyclical upswing remains to be seen, but for now, investors and central banks alike are betting big on bullion.