Gold has enjoyed a historic rally in recent weeks, smashing through record levels as investors rushed into the safe-haven asset amid global political turmoil.
The precious metal surged past $5,000 an ounce for the first time and briefly touched $5,500, dragging silver and platinum higher with it.
But the rally has since lost steam. Prices have fallen sharply following signs of political stability in the United States, although gold remains far more expensive than it was a year ago.
Analysts point to three key reasons behind gold’s dramatic rise – and one main factor behind its recent pullback.
Trump uncertainty shakes markets
Investor anxiety around US President Donald Trump’s trade and foreign policies has been a major driver of the gold rally. His renewed tariff threats and unpredictable stance on global trade unsettled markets, pushing investors away from equities and towards safer assets.
“Gold has been thrust into the spotlight because of concerns over US fiscal and foreign policy,” said Hamad Hussain, economist at Capital Economics. Emma Wall, chief investment strategist at Hargreaves Lansdown, added that gold prices jumped as investors reacted to Trump’s tariff threats and broader policy uncertainty.
War and geopolitics fuel safe-haven demand
Ongoing conflicts in Ukraine and Gaza, alongside rising geopolitical tensions elsewhere, have further boosted demand for precious metals. Trump’s controversial comments on Greenland and strained relations with major economies dented confidence in the US dollar, accelerating the shift into gold.
“Gold is doing what it does best when the world feels messy,” Wall said. “Trade tensions, geopolitical flare-ups and political uncertainty have all added to its appeal.”
Central banks and big buyers pile in
Central banks have also played a crucial role by increasing gold purchases as an alternative to dollar-denominated reserves. The move reflects concerns about over-reliance on US policy and the risk of assets being frozen during geopolitical disputes.
China remains the world’s biggest buyer of gold, driven by both jewellery demand and investment. Meanwhile, new institutional players – including cryptocurrency firm Tether – have entered the market, buying up large volumes of gold and adding further momentum to prices.
So why are prices falling now?
The recent pullback came after reports suggested Trump may nominate Kevin Warsh as the next US Federal Reserve chair – a figure seen by markets as less likely to aggressively cut interest rates or undermine the dollar.
That eased fears of runaway inflation and currency weakness, triggering a sell-off in gold, silver and platinum.
Despite the decline, analysts say precious metals remain attractive. Prices are still significantly higher than last year due to ongoing conflicts, tariff risks and global uncertainty.
“Gold isn’t tied to anyone’s debt like bonds or shares,” said Nicholas Frappell, global head of institutional markets at ABC Refinery. “It’s a powerful diversifier in an uncertain world.”
Still, as recent volatility shows, gold’s shine can fade as quickly as it brightens – a reminder that even safe havens come with risk.