The price of gold has risen to over $5,000 an ounce for the first time ever, after doubling in value over the course of a very strong 2025 for the precious metal.

The usual explanation for such strong rises is that gold is considered a safe bet for investors when other options look a little shaky. High inflation for example, when cash quickly loses value, is often linked to gold price rises. Trade wars and actual wars usually have a similar effect.

A common view then, is that gold performs well in moments of instability. But research I was involved with suggests that gold prices are not simply a reaction to short-term economic events.

Instead, they are a response to something deeper, reflecting an overall level of confidence in how economic systems are managed over time.

For during recent periods of sustained economic stability in the west, gold prices have remained largely flat. The steady growth, moderate inflation and predictable policy of the early 1990s and 2000s for example, were not good times for gold.

And rather than responding to every economic peak or dip, the thing that really pushes gold prices up is instability in what’s known as “monetary credibility”. In other words, when there are doubts about whether central banks and governments will be able...

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