Gold climbs above $4,000 in a record move – what is behind the rally?
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Gold prices continue to climb as investors look for a safe place to park their capital during a moment of geopolitical uncertainty, with the US government shutdown entering its second week.
The precious metal has gained more than 55% this year, and market analysts say investors aren’t solely focused on its ability to protect against inflation.
“While stock markets have generally done well this year, gold has been a superstar,” said Russ Mould, investment director at AJ Bell.
“Traditionally, investors would load up on the shiny stuff when markets look gloomy, not when they’re motoring ahead. It shows that investors are hedging their bets, particularly as there are growing concerns that euphoria around AI has gone too far and the bubble could burst at some point.”
Gold sales often rise sharply when investors seek secure investments for their money and can’t find viable options in the stock market.
Even before the government shutdown in the US, gold saw dramatic gains as President Donald Trump’s barrage of tariffs threw the global economy into limbo.
More recently, falling interest rates have further boosted gold’s attractiveness, as interest-bearing investments promise lower returns.
Other precious metals have also risen in value amid the uncertainty. Silver futures are up over 65% since January, trading above $48 per ounce on Wednesday morning in Europe.
Why are prices going up?
Much of the recent economic turmoil stems from Trump’s trade wars.
Since the start of 2025, steep new duties imposed on goods coming into the US from around the world have strained businesses and consumers alike — inflating costs and weakening the job market. Due to higher costs and an uncertain outlook, hiring has plunged, and an increasing number of consumers are expressing pessimism about the US’ economic outlook.
A government shutdown in Washington has added to those anxieties. Key economic data has been delayed, leaving investors in the dark about the true state of the US economy.
Giovanni Staunovo, commodity analyst at UBS Global Wealth Management, also explained gold’s rise by pointing to the continued weakness of the US dollar and renewed rate cuts from the Federal Reserve. Last month, the Fed cut its key interest rate by a quarter-point — and projected it would do so twice more this year.
Gold is priced in US dollars, meaning that when the currency drops in value, the metal becomes relatively cheaper for foreign buyers.
What about jewellery?
Many jewellery merchants and dealers have increasingly reported surges in customers looking to check the value of gold they own — sometimes opting to melt or sell family heirlooms to cash in on the precious metal’s rising price.
At the same time, those in the market for gold jewellery may be feeling “sticker shock” if they can’t afford certain products anymore.
Larger retailers like Pandora and Signet, whose brands include Zales and Kay Jewelers, have acknowledged these headwinds in recent earnings calls.
“If I’m a guessing man here, we will see a general price rise for the category,” Pandora CEO Alexander Lacik said in an August earnings call, pointing to rising costs of gold and silver, as well as tariffs.
Is gold worth the investment?
Advocates of investing in gold call it a “safe haven” — arguing the commodity can serve to diversify and balance your investment portfolio, as well as mitigate possible risks down the road as a hedge against rising inflation. Some also take comfort in buying something tangible that has the potential to increase in value over time.
With high investment demand, Goldman Sachs has raised its forecast for precious metals from €4,300 to €4,900 per ounce by the end of 2026.
“There is a growing trend away from the classic portfolio structure with 60% in stocks and 40% in bonds. In the current environment, it is recommended to invest about 20% in alternatives such as precious metals and cryptos,” said Alex Kuptsikevich, FxPro chief market analyst.
Still, experts caution against putting all your eggs in one basket. And not everyone agrees that gold is a good investment. Critics say gold isn’t always the inflation hedge many claim, and that there are more efficient ways to protect against potential loss of capital, such as derivative-based investments.
“Gold is perceived by many market participants as a safe-haven asset. But investors need to be aware it has a volatility of 10-15%,” Staunovo noted. He added that smaller amounts of physical gold, such as gold coins or 1-gram bars, have larger ranges between buying and selling prices.
The Commodity Futures Trade Commission has also previously warned people to be wary of investing in gold. Precious metals can be highly volatile, the commission said, and prices rise as demand goes up. This means “when economic anxiety or instability is high, the people who typically profit from precious metals are the sellers”.
The commission added that it’s also important to be cautious of potential scams and counterfeits on the market.
