The underlying reason for gold's all-time high is a general uncertainty about economic outlooks, causing many people to fear for their money and seek crisis-proof investments. Gold retains its value regardless of inflation levels, remains secure during currency reforms, and is immune to exchange rate fluctuations.
London is the most influential market for spot gold trading, as it is home to the London Bullion Market Association (LBMA), which has been setting the global benchmark price for gold trading since 1919. Other, slightly less significant trading hubs include China, India, the Middle East, and the United States.
Trump's tariff policy weighs on sentiment
For Frank Schallenberger, a commodities analyst at Germany's Landesbank Baden-Württemberg (LBBW), the primary reason for the current rally in gold is the tariff policy pursued by US President Donald Trump.
"It is causing uncertainty in financial markets, making gold, once again, a safe-haven asset," he told DW.
Another commodities analyst, Carsten Fritsch from German lender Commerzbank, shares the same view in a statement to DW.
"The biggest driver of the strong rise in gold prices is the uncertainty surrounding US President Donald Trump's tariff policies," he said, adding that the usual factors influencing the price of gold, such as the US dollar and interest rate expectations, are "not playing a significant role in the current price surge."
Social media spawning crisis fears
Fears of a global economic downturn are also fueled by speculative claims — some less credible than others. On various online platforms, predictions by American businessman and bestselling author Robert Kiyosaki are circulating. He predicted already a decade ago that a "massive economic crisis" is expected in 2025. He advises people to focus on "self-sufficiency and entrepreneurship" and to invest primarily in "gold, silver, and bitcoin."
Meanwhile, economists at US investment bank Goldman Sachs have taken a more sober look at the situation, pointing to the role of central banks around the world in pushing up the gold price.
Gold trading typically follows interest rates, and in times of low rates, investing in precious metals becomes particularly attractive, they said in a note to investors.
Central banks on a gold buying spree
Gold has many buyers — private individuals seeking to safeguard their wealth, institutional investors looking for alternatives amid dwindling returns, and even national economies.
According to Commerzbank analyst Fritsch, central banks may also have contributed to the price surge "through large-scale gold purchases."
One common reason central banks buy gold is to hedge against the risk of financial sanctions — something particularly relevant for emerging economies. These countries worry about being disproportionately affected by disruptions in global trade or getting caught in conflicts between major economic powers.
Goldman Sachs Research has reported that gold purchases in these nations have increased significantly since Western nations imposed sanctions on Russia in the wake of Moscow's full-scale invasion of Ukraine.
When will the gold rally end?
The World Gold Council (WGC), an industry group representing gold mining companies, remains cautiously optimistic about the gold price in the near term.
"We expect central banks to continue playing a key role in 2025, with more investors entering exchange-traded gold funds," WGC expert Louise Street told Manager Magazin. However, she also noted that "weakness in the jewelry sector is likely to persist, as high gold prices and slow economic growth reduce consumer purchasing power."
For LBBW's Frank Schallenberger, an end to the gold rally may already be in sight, as he predicts investors will sell and take profits anytime soon. "Later in the year, weak jewelry demand, a slight decline in coin and bullion sales, and reduced gold purchases by central banks are likely to push prices down again."
Carsten Fritsch at Commerzbank also sees signs of a slowdown coming. "Gold demand in China and India will likely weaken due to the recent surge in prices and record-high price levels," he said.
Furthermore, as the current cycle of interest rate cuts by key central banks such as the ECB in Europe or the US Fed is nearing its end, "gold's key support factors may soon disappear" amid stable or rising rates.
