Why has the price of gold fluctuated so much recently?

SEATTLE (Scrap Monster):  Gold is a precious metal that there is a finite supply of and it doesn’t tarnish or degrade easily. For many hundreds of years global currencies were backed by gold, or even made of it. As that is in longer the case today gold is seen as a solid, safe investment that has very little chance of losing all value even in the worst financial crisis. Prices have risen in recent years because global geopolitical and financial uncertainty and low interest rates combined lead to high demand from institutional investors. However, even gold is not immune from the whims of today’s fast paced market that reacts incredibly quickly to global events. And where there’s volatility, there can be profit for smart traders. 

Gold is Seen as a Safe Asset in Uncertain Times 

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The price of gold began to rise significantly after war broke out in Ukraine in 2022, and continued at a steady pace since.

However, it really took off in late 2025 when US President Donald Trump began his campaign of tariffs. The uncertainty this caused in many investors’ minds led them to plough money into “safe” gold, which resulted in rising prices. 

Prices rose again sharply in January 2026 after the US took military action in Venezuela to unexpectedly seize the country’s president Nicolas Maduro. Then, Trump’s initial refusal to rule out military force in his aim of obtaining the Danish territory of Greenland added fuel to the fire of investor fears – further spiking precious metal prices. 

Although things have since stabilised, see below, increasingly geopolitical tensions trigger a buying frenzy among investors looking to hedge their bets against global or regional crises, which causes rapid increases in price. Although, when things calm down again…

Speculation About Interest Rate Cuts Can Also Prices 

Outside of global geopolitical events, gold has been on the rise ahead of average inflation for some time. This is because the USD is the de-facto world reserve currency and interest rates remain relatively high in the US. When the Federal Reserve keeps interest relatively high, as it is now, investors should, in theory, prefer government bonds over gold as precious metals pay zero interest as an investment. 

However, the demand for gold has remained steady despite this balancing effect. This means any cuts in the Feds interest rate could send investors back to gold en masse. So when rumors start that the US Federal Reserve might cut interest rates the price of gold can sometimes spike again – adding to the volatility. 

Add to that that central banks often change interest rates based on inflation data, which has been up and down in the US, and expectations can shift wildly. The price of gold has also historically been linked to the strength of the US dollar, which is also subject to Fed policy and market rates. In sum – it’s a complex situation, with many variables, and the global gold market is now arguably more volatile than ever because of it. 

Central Banks are Driving High Global Demand 

Given all the above factors, central banks have been buying gold at record rates for several years now. Historically low interest rates that spiked in 2021 and 2022 have led countries to want to solidify their gold stocks as a future hedge. 

Interestingly, consumer demand is also strong. In Asia specifically, gold jewellery and other items are increasingly a status symbol to the middle classes. 

Although prices have fallen for gold globally in recent weeks, many see this as a correction that won’t last too long. A 9% daily fall in late January has seemingly corrected itself and prices are now a little more consistent – but still near record highs.

Even if traders have calmed down, as the US backs away from the possibility of using military force in Greenland and uncertainty over Trump’s Fed appointments subsides, central banks seemingly remain committed to buying gold. 

For example The People’s Bank of China now owns more gold than at any time in history. While investor speculation can make the market more volatile in the short term, most analysts expect gold (and silver) to have hit a new price floor in 2025 and it is unlikely to fall back down to pre-pandemic levels anytime soon. 

Courtesy: www.inquirer.net