What drives the gold price?

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Gold Price

Gold is a globally traded precious metal that acts as both a commodity and a store of value. Its price reflects how safe or risky the world feels to investors. Between March 2023 and March 2026, gold moved from about $2,000 per ounce to above $5,000 per ounce. Understanding what drives gold helps explain broader shifts in global risk, inflation, currencies, and trade.

Main drivers

What pushes gold price up

  • Economic uncertainty and trade tensions — When the global economy feels unstable, investors move money into gold as a safe place to park it.
  • Geopolitical turmoil — Military conflicts, political crises, and international confrontations trigger fear, sending investors rushing to gold.
  • Expectations of falling interest rates — Gold pays no interest, so when rates drop or are expected to drop, holding gold becomes less costly compared to bonds.
  • A weaker US dollar — Gold is priced in dollars, so when the dollar loses value, gold becomes cheaper for foreign buyers and demand rises.
  • Rising inflation — Gold is seen as protection against rising prices, so when inflation climbs, investors buy more gold.
  • Central bank gold buying — When governments stockpile gold to diversify away from the dollar, that creates steady, structural demand.

What pushes gold price down

  • Progress in trade negotiations — Good news on trade deals reduces fear, which reduces the need for safe-haven assets like gold.
  • A stronger US dollar — A rising dollar makes gold more expensive for non-dollar buyers, which suppresses demand.
  • Rising interest rates — Higher rates make bonds and savings accounts more attractive relative to gold, pulling money away from bullion.

Historical examples

When gold price increased

  • Economic uncertainty and trade tensions

    • April 2025 tariff escalation — Gold surged past $3,490 per ounce on April 22, 2025, gaining more than 30% since the start of the year. The rally was driven by risk aversion as the US-China trade war intensified, with China planning a 34% tariff on US goods and Trump threatening an additional 50% tariff. China vowed to "fight to the end."
    • 2025 full-year rally — By late October 2025, gold had risen 54% for the year, supported by economic and geopolitical uncertainty, expectations of rate cuts, strong central bank buying, and sustained investment fund inflows.

  • Geopolitical turmoil

    • US-Iran military confrontation, February 2026 — Gold climbed to $5,050 per ounce after US forces shot down an Iranian drone near an aircraft carrier in the Arabian Sea. The single-day surge of over 6% was the largest since 2008.
    • Iranian President's death, May 2024 — Gold hit $2,440 per ounce after the Iranian president was killed in a helicopter crash, raising political uncertainty across the Middle East.
    • US capture of Venezuelan president, January 2026 — The US captured the Venezuelan president and announced temporary US control over Venezuela, escalating global tensions and pushing gold higher.

  • Expectations of falling interest rates

    • Fed signals, October 2025 — Gold hit $4,050 per ounce as meeting notes from the Federal Reserve showed that policymakers were likely to continue cutting rates because of a fragile labor market. This drove money away from the dollar and into gold.
    • Fed tone shift, March 2023 — Gold approached $2,000 per ounce after the Fed struck a tone leaning toward cutting rates. Lower rates reduce the cost of holding gold, which pays no interest.
    • Cooling inflation data, May 2024 — Slowing US consumer inflation gave the Fed more room to begin cutting rates. Markets bet the first cut would come in September. Gold hit a record $2,440 per ounce.
    • European Central Bank rate cuts, April 2025 — The ECB cut its key rate for the seventh time in a year, lowering it to 2.25%. This low-rate environment made gold more attractive, helping it surge to $3,400 per ounce.

  • A weaker US dollar

    • Dollar falls to three-year low, April 2025 — Concerns about the independence of the Federal Reserve pushed the dollar to its lowest level in three years. The White House was studying whether it could fire the Fed chair. The weak dollar helped gold break above $3,400 per ounce.

  • Rising inflation

    • Tariff-driven inflation, July 2025 — US annual inflation accelerated to 2.7%, the highest level since February, as businesses started passing on higher import costs from new tariffs. Gold rose toward $3,340 per ounce as investors assessed the pickup in prices.

  • Central bank gold buying

    • Global central bank purchases, mid-2025 — Central banks bought a net 20 tonnes of gold in May 2025, led by Kazakhstan, Turkey, Poland, and Singapore. China extended its buying streak to seven straight months, lifting total purchases since November to 34.2 tonnes.
    • China's long-term accumulation, 2024 — Strong central bank buying by China, seeking to reduce its dependence on the US dollar, provided a floor under gold prices throughout 2024.

When gold price decreased

  • Progress in trade negotiations

    • US-China preliminary deal, October 2025 — Gold fell more than 2.5% toward $4,000 per ounce after officials reached a preliminary agreement on export controls, agricultural purchases, and shipping levies. Reduced fear meant reduced demand for gold.

  • A stronger US dollar

    • Post-US election dollar rally, November 2024 — Gold fell below $2,560 per ounce over five consecutive sessions after the US presidential election. Markets expected the new administration's policies to slow the pace of rate cuts, strengthening the dollar and making gold less appealing.

  • Rising interest rates

    • Central bank rate hikes, June 2023 — Gold dropped to $1,920 per ounce, a three-month low. The Fed chair said the benchmark rate should reach 5.75% by year-end. Australia's central bank unexpectedly raised rates to 4.1%, and the Bank of England raised by a larger-than-expected half percentage point. Higher rates everywhere made gold less attractive.

Who benefits

When gold price rises

  • Canadian exporters and economy — Canada is a major gold producer. Gold exports surged in February 2024, with unwrought gold shipments jumping 68.8%, helping drive total exports to record levels and supporting GDP growth.
  • Canadian and Australian mining sectors — Mining companies see higher revenues and stock prices. On the Toronto exchange, mining stocks led gains on multiple occasions in 2025 and 2026 when gold rallied.
  • Australian exporters — Australia's goods exports rose 7.9% in September 2025, largely driven by a 62.2% surge in gold shipments. Gold was projected to become Australia's second-most valuable export.
  • South African currency and economy — The South African rand strengthened toward its highest level since mid-2022, benefiting from surging gold prices. A stronger rand helped push inflation lower and raised expectations for rate cuts.
  • China's reserve portfolio — The value of China's gold reserves rose to $199 billion in October 2024 from $191.5 billion the prior month, even though the central bank paused purchases during that period.

When gold price falls

  • Dollar-based investors and savers — A falling gold price often coincides with a stronger dollar and higher interest rates, which reward holders of cash and bonds.
  • Gold-producing nations' reserves — China's gold reserves value dipped to $242 billion from $244 billion in May 2025 due to falling bullion prices, despite continued purchases.
  • South African foreign reserves — South Africa's reserves fell slightly in December 2024 alongside a drop in the dollar gold price.
  • Mining stocks — Canadian mining shares came under pressure on days when gold retreated, with the Toronto exchange weakening as gold reversed earlier gains in February 2026 and November 2025.