After setting 40 records and climbing 23% in 2024, the spot price for gold in March topped $3,100 per troy ounce, forcing analysts to adjust their forecasts amid the gold price surge.
Investors rush to buy gold as geopolitical turmoil simmers and trade uncertainty spreads and deepens. Governments, businesses and investors are grappling with President Donald Trump’s recent tariffs and tariff threats and this comes on top of global central banks continuing to shore up gold reserves.
Market watchers quickly point out that no one factor is responsible for these increases. That said, here’s a look at what’s likely driving the gold price surge.
Key Factors Contributing to Gold's Rise
The gold price is up more than 15% this year. Watching gold market trends, analysts predict it will continue to rise through the end of 2025 and into 2026. Here’s why:
Trade Tensions and Tariff Concerns
Global demand for gold is increasing and investors are contributing to the increase as they continue pouring money into gold.
Global trade tensions and concerns about tariffs fuel the surge in demand. President Donald Trump’s announcements of tariffs on trade partners and reciprocal tariffs on other countries have heightened existing economic uncertainty.
The stock market is slipping and the price of gold is soaring. Worried about potential breakdowns in world trade and slowdowns in global economic production, investors are seeking gold as a store of value and a safe haven to guard against inflation as the value of currency drops.
Geopolitical Instabilities
Before Trump’s election in 2024, geopolitical unrest was already driving investors to look for safety in precious metals. Geopolitical risk and gold volatility typically go hand in hand: As global political tensions escalate, so does the price of gold. Wars and other conflicts bolster gold’s appeal to investors seeking stability in their portfolios.
The world has no shortage of hotspots. Russia’s war with Ukraine entered its fourth year in February. Middle East tensions continue to boil with Israel resuming fighting in occupied Palestinian territory in Gaza, the U.S. attacking the Houthis with drones in Yemen and Trump threatening to bomb Iran for rejecting a nuclear deal.
U.S.-China relations are also taut over China’s claims to the South China Sea and Taiwan and a potential invasion of the island nation.
Central Bank Demand and ETF Investments
Central banks have played a significant role in helping push the price of gold higher.
Led by Russia and China, global central banks, including many in developing countries, increased the amount of gold they bought in 2024 and carried those policies into 2025. Central banks bought 1,045 tonnes of gold in 2024, the third year gold buying by global central banks topped 1,000 tonnes.
Central banks' continued purchase of gold also reflects other countries’ nervousness about the U.S. dollar. As the dollar's value continues to drop, gold prices rise as it takes more dollars to buy the precious metal.
Meanwhile, global investment demand has increased the money flowing into gold exchange-traded funds (ETFs).
In 2024, gold investment rose 25%, helped by strong gold ETF investment in the year's second half. Analysts give partial credit for the gold price surge this year to investors buying gold-backed ETFs and predict gold ETF investment will continue throughout 2025.
Anticipation of Federal Reserve Rate Cuts
While geopolitical risk, economic uncertainty and gold-backed ETF investment get much of the credit for surging gold prices, another piece of the puzzle is market expectations regarding the Federal Reserve’s decisions on interest rates. Analysts believe investors still anticipate the Fed to lower interest rates, possibly twice in 2025.
Further Fed interest rate cuts in 2025 could fuel additional investments in gold. As rates drop, making interest-yielding assets less appealing, analysts predict investors may invest more money in gold because of the metal’s non-yielding nature.
Market Reactions and Forecasts
Investors are reacting to soaring gold prices and the factors driving them. Major banks have updated their forecasts and gold investment is surging.
Banking Sector Perspectives
At 8:44 p.m. on April 1, the gold price was up $13.59 to $3,135.16. That price far outstripped the average annual forecast for 2025 put out by Goldman Sachs and Bank of America last year. As a result, both major banks adjusted their projections.
Bank of America increased its average gold price forecast for 2025 and 2026. The bank previously predicted that the price of gold would average $2,750 per ounce this year and $2,625 per ounce in 2026. It now predicts that gold will trade at $3,063 per ounce in 2025 and $3,350 per ounce in 2026.
Similarly, Goldman Sachs’ forecast jumped from a previous projection of $2,890 per ounce to $3,100 with a possible high of $3,300 per ounce.
Investor Behavior
Whether the gold price rally continues may come down to investor behavior.
Looking to diversify their portfolios, many investors have gone long on gold, seeking safety from potential fallout from geopolitical unrest and trade wars. However, some may decide to speculate and drop their long positions, putting downward pressure on gold prices.
Investors are uncertain how long Trump’s tariffs may last, motivating them to seek gold as a store of value to preserve their wealth. Investors anticipating a looming crisis or higher inflation may also consider gold a haven.
These factors could spur increased investment in gold and higher ETF inflows. Bank of America believes a 10% increase in gold investments could drive the gold price to $3,500 within two years.
Consider Making Gold Part of Your Portfolio
The factors behind the recent gold price surge don’t seem likely to vanish anytime soon but that uncertainty is prompting investors and central banks to buy record amounts of gold.
The rising prices present opportunities though it’s a given that investments always involve risks. Consider whether now might be the time to diversify your portfolio with gold to hedge against economic uncertainty.