Why have gold prices hit record highs?

Gold has been reaching record highs of late, with the price of spot gold hitting $3,357.40 (£2,532) per ounce for the first time ever on Wednesday.

It marked a rise of around $700 (£528) this year and comes at a time of significant uncertainty over Donald Trump’s tariffs on imports into the US.

That is no coincidence.

That’s because gold is a tangible commodity – a physical good that can be bought and sold.

Gold prices fell more than 1% on Thursday after a sharp rise in the previous session as investors booked profits ahead of a long Easter weekend.

An estimated 3,000 tonnes are mined each year, with China mining the most gold in 2024, followed by Russia, Canada and the US.

And the Bank of England holds the world’s second biggest known trove, with roughly 400,000 gold bars worth billions of pounds sitting in its vaults.

So why is it going up in value?

Gold considered a ‘safe haven’

The precious metal is known as a “safe haven” – an asset that typically retains or increases in value during times of market turbulence or economic uncertainty.

Investors typically flock to safe havens to protect their capital from losses when markets are volatile.

So it’s perhaps no surprise that its value has skyrocketed at a time when markets around the world have been unsettled by the introduction and temporary rolling back of some US tariffs.

“Gold remains heavily supported by a broadly weaker dollar, uncertainty around tariff announcements and fears about a global recession,” said Lukman Otunuga, senior research analyst at online trading broker FXTM.

Singapore-based dealer GoldSilver central managing director Brian Lan added: “Gold will continue to be strong as long as there’s uncertainty.”

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Gold saw a similar surge at the start of the COVID-19 pandemic, but has been on an upward trend for years.

Popular investment, but not without risk

Those in favour of investing in gold argue it can serve to diversify and balance your investment portfolio, as well as mitigate possible risks down the road.

Some also take comfort in buying something tangible that has the potential to increase in value over time, and which isn’t directly tied to global currencies.

But gold sceptics warn people to be wary.

The Commodity Futures Trade Commission has previously warned that precious metals can be highly volatile, and prices rise as demand goes up – meaning “when economic anxiety or instability is high, the people who typically profit from precious metals are the sellers”.

It adds that if you do choose to invest in gold, it’s important to educate yourself on safe trading practices and be cautious of potential scams and counterfeits on the market.

And while gold being a tangible currency is in many ways seen as a plus, it also means it can run out; and some analysts estimate it will do so in less than three decades.

You can read more about the impact of a gold shortage here.