Geopolitical factors, economic uncertainty behind historic USD 3000 gold price surge

NEW DELHI: Gold prices touched a historic milestone, hitting USD 3,000 per ounce, reinforcing its role as a safe-haven asset during times of economic uncertainty.

According to John Reade, Senior Market Strategist at the World Gold Council, gold has consistently performed well in risk-off environments, climbing from USD 1,000 during the financial crisis to USD 2,000 amid the pandemic, and now surpassing USD 3,000 as global uncertainty intensifies.

He said, “Gold hitting US$3,000 per ounce is a significant milestone and reinforces the asset’s safe haven role in times of uncertainty. From $1,000 during the financial crisis to $2,000 amid the pandemic, gold has proven to perform well in risk-off environments as well as delivering returns in line with most other asset classes since 1971.”

He added, “Since 2022 gold has broken its tight relationship with US Interest rates and the USD as central banks have doubled their gold purchases and investment demand from emerging markets has grown.”

One of the key drivers behind gold’s rise is the changing dynamics of central bank purchases. Since 2022, central banks have doubled their gold buying, accumulating over 1,000 tons annually, with 1,045 tons purchased in 2024 alone.

Reade attributes this surge to geopolitical factors such as de-dollarisation, inflation concerns, and economic sanctions, which have prompted central banks to strengthen their gold reserves.

He said, “We believe geopolitical factors have driven this increase – including de-dollarisation, sanctions, and inflation concerns. As global fragmentation continues, central bank buying will remain a strong pillar of demand and shape the market’s long-term dynamics.”

Additionally, investment demand from emerging markets has grown significantly. In China, a stagnant property market has led investors to shift towards gold, while in Turkey, demand has surged as households seek to hedge against currency depreciation. In India, the government’s import duty cuts have further fueled gold purchases.

The recent rally has also been amplified by rising economic risks, particularly uncertainty surrounding US tariffs and trade wars. As global market volatility increases, investors have turned to gold as a key diversifier to protect their portfolios.

Reade stated, “Adding to this longer-term trend, the recent rally has been the result of uncertainty around US tariffs and the developing trade war, which has been amplifying economic risks and market volatility, further driving investor interest in gold as a key diversifier.” (ANI)