Article content

(Bloomberg) — Gold prices passed $3,000 an ounce for the first time ever, driven higher by a central bank buying spree, economic fragility worldwide, and President Donald Trump’s attempts to rewrite the rules of global trade by imposing tariffs on allies and strategic rivals.

Article content

Article content

Bullion climbed as much as 0.4% to $3,001.20 an ounce on Friday.

The move through the psychological $3,000 level drives home gold’s centuries-old role as a store of value in turbulent times and as a gauge of fear in markets. In the last quarter century, the price has risen 10-fold, outperforming even the S&P 500, the benchmark for US stocks, which quadrupled over the same period.

Article content

As traders braced for tariffs, US prices for gold surged above other international benchmarks, prompting dealers to rush bullion into America in large volumes before the levies come into force. More than 23 million ounces of gold, worth about $70 billion, flowed into the depositories of New York’s Comex futures exchange between election day and March 12. The influx has been so vast that it helped drive the US trade deficit to a record in January.

Jumps in the gold price typically track broader economic and political stress. The metal breached the $1,000 an ounce mark in the aftermath of the financial crisis, and passed $2,000 during the Covid pandemic. Prices fell back towards $1,600 after the pandemic, but began to rise again in 2023, driven by central banks, who bought bullion to diversify away from the dollar, over fears that the currency made them vulnerable to punitive action from the US.

In early 2024, the market leaped again, driven by buying in China, where worries about the country’s economy were growing. The rally gained further momentum after the US election, as markets absorbed the new administration’s aggressive trade policy. 

Article content

Article content

“Gold is an asset that is able to preserve value under the biggest variety of macroeconomic dislocations that we have seen,” said Thomas Kertsos, co-portfolio manager at First Eagle Investment Management LLC. “We’ve seen that over centuries gold has been able to — despite the volatility — always mean-revert and always maintain its purchasing power, all while providing significant liquidity.”

Gold’s recent rally has come despite what would typically be headwinds: higher interest rates and a strong US dollar. When bonds or cash in the bank give a solid return, gold, which doesn’t generate interest, becomes less appealing. The US dollar is the main currency in which gold is bought and sold. When it becomes more expensive to holders of other currencies, that typically leads to selling pressure on the metal.

This time, those same forces have brought new buyers into the market. As the yuan sunk against the dollar, Chinese investors piled in. Persistently high inflation worldwide has also boosted gold’s appeal as a store of value. And then there’s investor fears of losing out on gold’s latest gain.

Article content

“A lot of investors missed out when gold went through $2,400, $2,500, $2,600. We kept saying: ‘this won’t last, there’ll be a correction and it will consolidate’,” said Philip Newman, founder of consultancy Metals Focus. “It did nothing of the sort. I think there was a sense that investors don’t want to miss out on $3,000.”

But it is the new US government’s aggressive and unpredictable trade policy that has been the most important driver for gold in 2025. President Trump has enforced tariffs on Canada, Mexico and the European Union, and imposed duties on Chinese goods, and on all imports of steel and aluminum. After the EU hit back with its own tariffs, the US indicated it would escalate the burgeoning trade war.

The Trump administration has threatened wider disruptions to the global order. The president has indicated that the US is willing to use economic coercion — or even force — to take control of Greenland and the Panama Canal; and proposed a highly controversial reconstruction plan for Gaza. Since stunning European allies in February by announcing that the US would open negotiations with Russia over the future of Ukraine, the Trump administration has called into question American security guarantees over Europe, which have underpinned peace and stability for decades.

Article content

“You’ve got huge uncertainty coming out of US policy that’s also just casting its shade over the global economy this year,” said Ian Samson, a multi-asset portfolio manager at Fidelity in Singapore.

The foundations for the gold rally were partly set by global central banks’ wariness of relying heavily on the US dollar, also a reflection of geopolitical uncertainty.

Following Russia’s invasion of Ukraine in 2022, many Russian dollar assets held abroad were frozen. Central banks took note: the dollar could be used as a weapon, with their access to the financial system shuttered at the behest of the US. Since the invasion, central bank gold buying has doubled, from about 500 metric tons a year to more than 1,000.

China, which successive US governments have seen as a geopolitical rival, significantly ramped up its purchases in 2022. While its buying has slowed as prices have soared, other central banks have picked up the slack, with Poland, India and Turkey topping the ranks as the largest buyers last year, according to the World Gold Council.

In spite of its rally, gold is still a long way from its all-time inflation-adjusted peak, which was set in 1980 and equates to about $3,800 an ounce. Back then, it was a combination of weak economic growth, runaway inflation, and growing geopolitical frictions that sent prices soaring, and some analysts believe similar forces will keep gold moving further into uncharted territory in 2025. 

The rally to $3,000 has come faster than most mainstream forecasters predicted. Over the past year, as the price passed decisively through the key psychological milestones of $2,000 and $2,500, most analysts ratcheted up their forecasts, rather than changing their view. Already, some analysts have the next major marker in sight.

“For it to hit $3,500/oz, investment demand would need to rise 10%,” Bank of America analysts led by Michael Widmer said in a Feb. 12 note. “That’s a lot, but not impossible.”

Article content