Gold has experienced a record-breaking year as investors seek safe-haven assets amid market uncertainty.
This morning, the precious metal surged to a new all-time high, surpassing $3,000 per ounce. The rally has been fueled by escalating geopolitical tensions in the Middle East, fears of a trade war, and a weakening US dollar.
Gold reached $3,027 per ounce following reports of widespread Israeli military strikes across Gaza, raising concerns that the fragile ceasefire in the region may have collapsed.
Since the start of the year, gold has gained 15%, ending December at $2,623 per ounce. This follows a 27% surge in 2024, bringing its five-year gains to a doubling in value, as illustrated in the chart below.
A chart showing the gold price since 2020: LSEG
AJ Bell investment director Russ Mould believes we are witnessing the third major bull run in gold since the U.S. abandoned the gold standard on August 15, 1971.
He explains:
“The first surge occurred in the 1970s, following President Nixon’s decision to sever the link between the U.S. dollar and gold—a move designed to allow greater government spending, particularly on the Vietnam War. Two oil price shocks in 1973 and 1979 fueled inflation, prompting investors to turn away from paper assets like government debt in favor of tangible assets with limited supply, such as gold.”
“The second major rally took place in the early 2000s, as central banks responded to a series of crises—ranging from the 1998 collapse of the LTCM hedge fund and the millennium IT bug to the bursting of the dot-com bubble and the Great Financial Crisis. Policymakers introduced record-low interest rates and aggressive Quantitative Easing (QE), which led some investors to fear that central banks had lost control, much like in the 1970s.”
“The current rally has its roots in the last decade, during which central banks maintained near-zero interest rates and continued QE without meaningful tightening. The COVID-19 pandemic further strained government finances, leading to an unprecedented surge in borrowing, particularly in the U.K. and U.S. In the U.S., federal debt has soared, and the annual interest bill has now reached $1.2 trillion—over a fifth of federal tax revenues. This has raised concerns about the sustainability of the system. The Trump administration is attempting to address the issue through tariffs and efforts to revitalize U.S. manufacturing, but gold investors may be sensing another shift in global monetary policy, especially as inflation remains persistently above central banks’ 2% target.”
When Nixon took the U.S. off the gold standard, gold was fixed at $35 per ounce under the Bretton Woods system—a level the U.S. struggled to maintain as the money supply expanded and other nations exchanged their dollar reserves for gold. Once the U.S. abandoned this commitment, gold began its ascent, reaching $835 per ounce by January 1980.
