From Stable to Stratospheric: Gold's Price Journey (2020-2025)

      Over the past five years, gold prices in the US have seen a significant increase, driven by a confluence of factors. One key driver has been global economic uncertainty, prompting investors to seek safe-haven assets like gold. Escalating trade tensions, particularly between the US and China, along with geopolitical risks such as the war in Ukraine, have further fueled this demand. According to Econofact, the increase in global economic uncertainty accounted for almost half (47 percent) of the rise in gold price over the year ending in January 2025. This uncertainty makes gold attractive as a store of value during turbulent times.

     Another major factor is the weakening US dollar. Since gold is often dollar-denominated on world markets, its price tends to exhibit an inverse relationship with the dollar. As the dollar weakens against other major currencies, gold becomes comparatively less expensive for foreign buyers, increasing demand and driving up prices. Central banks, especially in emerging markets, have also been accumulating gold reserves to diversify away from the US dollar, adding to the upward pressure on prices. This trend reflects a growing concern over potential US recession and a desire to hedge against inflation.

     Furthermore, low interest rates contribute to gold's appeal. When interest rates are low, the opportunity cost of holding gold (which pays no yield) decreases, making it more attractive to investors. 1  Conversely, rising interest rates tend to dampen gold demand. The combination of these factors – economic uncertainty, a weaker dollar, central bank buying, and low interest rates – has created a perfect storm for gold prices to rise substantially in the US over the past five years.