Five Reasons Gold Is Surging Toward $5,000 an Ounce

Buying the precious metal has become the antidote for market jitters.

Investors have plenty to worry about lately. Whether it is lower bond yields, expensive stocks or President Trump’s tariffs, their response has been the same: Buy gold.

Just three months after hitting the once-unthinkable price of $4,000 a troy ounce, gold prices are on the cusp of $5,000.

Futures rose 1.5% Wednesday to settle at a new all-time high of $4,831.80. Gold has added more than $500 an ounce so far this month—including a record one-day gain of $171.20 on Tuesday—rallying on Trump’s since-rescinded threats to slap additional tariffs on Europe in his quest for Greenland and heightened concern about the independence of the Federal Reserve.

Here are five factors propelling the market:

The debasement trade

Among the most bullish gold buyers are those worried about the strength of the U.S. dollar and other major currencies. They have snapped up the precious metal as a store of value that they hope will withstand economic shocks.

Lately Trump has given them plenty to be cautious about. Just this month he authorized an incursion into Venezuela to depose strongman Nicolás Maduro, ramped up his pressure campaign on Fed Chair Jerome Powell to reduce interest rates with a Justice Department probe and has threatened an additional layer of tariffs on European allies if they don’t oblige his pursuit of Greenland.

A hand holds a gold bar, with other gold bars and coins visible in the background.

Known on Wall Street as the debasement trade, the strategy is driven by fear that governments’ inability to tame inflation or slash debt will erode the value of currencies that underpin the global financial system.

In early 2025, investors rushed to gold while Trump’s barrage of tariffs contributed to the dollar’s worst first half in 50 years. After Powell in August signaled that the central bank would begin cutting interest rates despite above-target inflation, gold kept climbing.

Meanwhile, ballooning debt loads and expansionary economic policies in Europe and Japan have added fuel. As traders parsed renewed fears of a trans-Atlantic trade war, a bond selloff in Japan on Tuesday sent yields on that country’s longer-dated government debt to records. 

Analysts say the stability of those market bedrocks—as well as the institutions that oversee them—could dictate gold’s path forward. 

“Gold’s rally is about trust,” TD Securities strategist Daniel Ghali told clients Tuesday. “For now, trust has bent, but hasn’t broken. If it breaks, momentum will persist for longer.”

Lower interest rates

The Fed’s rate cuts, which have slashed the yield on government bonds and cash, are also driving investors to gold.

Supersafe Treasurys became a worthwhile investment in 2022 when the Fed began raising interest rates to combat Covid-era inflation. The amount of cash held in money-market funds, which buy Treasurys, swelled to $7.7 trillion late last year, from about $5.1 trillion in early 2022, before rates began to rise.

Government bonds and money-market funds have lost some of their appeal now that the returns are lower—and potentially headed lower if Trump gets his way and the central bank reduces rates further.

Lower returns on risk-free assets like Treasurys reduce the opportunity cost of holding gold, which offers no yield yet has much greater upside potential.

If just a slice of the mountain of cash held in money-market funds is shifted into gold, there could be an outsize impact on prices for the precious metal. Goldman Sachs analysts estimate that exchange-traded funds that hold gold account for just 0.17% of U.S. private financial portfolios, and that for every 0.01% increase—driven by purchases rather than appreciation—the price of gold would rise by 1.4%.

Central bank buying

Meanwhile, investors must compete for gold with a set of buyers for which price is rarely an issue: central banks. 

Central banks, which were net sellers of gold for many years, flipped to net buyers in 2010 when they reassessed their risks following the financial crisis sparked by the American mortgage meltdown. Central banks picked up the pace of their gold purchases in 2022.

That is when the West sanctioned Russia over its invasion of Ukraine. Central banks in countries that have strained relationships with the West, including China, have been shifting away from dollar-based assets into gold, which is beyond the reach of foreigners. 

Others, including the National Bank of Poland, an aggressive gold buyer that on Tuesday approved another big purchase, seek to ensure the stability of their own currencies by adding assets without the same risks as sovereign debt. 

“Central banks are buying gold not just purely for its price performance, but the role that it can play in foreign reserves,” said Juan Carlos Artigas, head of research for the World Gold Council. “Gold is very useful to hedge or diversify the reserves.”

Expensive stocks

Like gold prices, stock-market benchmarks have been hitting record highs. Their dizzying heights are making investors nervous.

The most common way to value stocks is as a multiple of earnings. One popular measure, a cyclically adjusted version of the price-to-earnings ratios that rely on analyst forecasts of future profits, says that stocks have been more expensive only once during the past 100 years: right before the dot-com bubble burst in 2000.

Tech stocks are again the main source of concern in the stock market, where a few huge companies such as Nvidia, Tesla and Amazon.com can pull the S&P 500 index higher or lower no matter what the other 490-some stocks do.

On Tuesday, for instance, each of the so-called Magnificent 7 technology stocks ended lower, shedding a collective $683 billion and dragging the S&P 500 down 2.1%. Meanwhile, the Russell 2000 index of smaller companies, which lost 1.2%, outperformed the S&P 500 for the 12th straight day, showing how investors are pursuing alternatives to big tech stocks.

Momentum

Gold is a good bet to keep gaining, if for no other reason than gold rallies tend to be long-lasting. In five of the six years before 2025 that gold futures rose by at least 20%, they climbed again the following year. And in those five years, the average increase was more than 15%, according to Citi analysts.

The pattern held in 2025, when gold followed 2024’s 27% increase with a 65% gain.