Gold breaks $5,000 barrier in historic rally driven by geopolitical uncertainty

Gold prices have surged past $5,000 an ounce for the first time on record, capping a historic rally that has seen the precious metal gain more than 60% in 2025 amid mounting geopolitical and financial uncertainty.

The latest rise comes as tensions between the United States and Nato over Greenland have added to already fragile investor sentiment, while US President Donald Trump’s trade policies have further unsettled global markets per BBC. On January 24, Trump threatened to impose a 100% tariff on Canada if it proceeds with a trade agreement with China, a move that rattled investors and fuelled demand for so-called safe-haven assets.

Gold is traditionally sought during periods of instability, and the rally has extended across the precious metals market. On January 23, silver climbed above $100 an ounce for the first time, building on an almost 150% increase last year.

A combination of factors has driven demand, including higher-than-usual inflation, a weak US dollar and significant buying by central banks. Expectations that the US Federal Reserve will cut interest rates again this year have also played a major role. Wars in Ukraine and Gaza, as well as Washington seizing Venezuelan President Nicolás Maduro, have further contributed to the metal’s rise.

One of gold’s enduring attractions is its scarcity. According to the World Gold Council, around 216,265 tonnes of gold have ever been mined—enough to fill just three to four Olympic-sized swimming pools. Most of that extraction has taken place since 1950, as mining technology improved and new deposits were discovered. The US Geological Survey estimates that a further 64,000 tonnes remain underground, though supply is expected to plateau in the coming years.

“When you own 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,” said Nicholas Frappell, global head of institutional markets at ABC Refinery.

“It's a really good diversifier in a very uncertain world,” he added.

Gold’s performance in 2025 marked its strongest annual gain since 1979, as investors sought protection from volatility linked to tariffs and concerns that artificial intelligence-related stocks may be overvalued. Susannah Streeter, chief investment strategist at Wealth Club, said gold “seems to know no bounds” amid persistent political uncertainty.

“The pile on into the gilded safe haven is continuing with the precious metal racing up higher,” she said, adding that trade tensions sparked by Trump’s tariff threat against Canada had “unnerved investors”.

Lower interest rate expectations have also supported prices. “It's inversely correlated because the opportunity cost of keeping the money in a [government bond] is really not worth it anymore, so people go to gold,” said Ahmad Assiri, research strategist at Pepperstone. The Federal Reserve is widely expected to cut rates twice this year.

Central banks have been major buyers, adding hundreds of tonnes of bullion to their reserves last year.

“There's a very clear shift away from the US dollar, which is benefiting gold immensely,” said Kavalis.

However, Frappell cautioned that the rally could reverse if sentiment improves.

“There's got to be scope for unexpected news that actually might be positive for the world and not necessarily positive for gold,” he said.

Beyond investment, cultural demand remains strong. In India, gold is traditionally bought during festivals such as Diwali, while Morgan Stanley estimates Indian households hold $3.8tn worth of gold—about 88.8% of GDP. China, the world’s largest consumer market, also sees seasonal demand, particularly ahead of Chinese New Year.

“We often see a seasonal uptick in demand around Chinese New Year, which we are seeing at the moment to an extent,” said Kavalis, referring to the upcoming Year of the Horse.

By Sabina Mammadli