Here are some reasons gold prices keep marching higher
The world’s central banks are hedging their bets against the dollar
Updated:
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Key Insights
- Surge in Gold Prices Driven by Central Bank Activity: Since 2022, gold prices have surged—rising nearly 62% in 2024 alone—largely due to central banks buying gold to hedge against geopolitical risks, market volatility, and overreliance on the U.S. dollar.
- Central Banks Favor Gold Over Euro: In 2024, gold surpassed the euro as the second-largest reserve asset globally, making up nearly 20% of reserves compared to the euro’s 16%, according to a European Central Bank report.
- Inflation and Rate Expectations Fuel Demand: Persistent inflation and anticipated interest rate cuts have pushed both institutional and retail investors toward gold and gold ETFs, with retail demand remaining particularly strong in Asia.
The price of gold, which many retirees have in their retirement portfolios, started moving sharply higher in 2022 after Russia invaded Ukraine. But since then, the price of the precious metal has continued to hit record highs.
A new report from the European Central Bank suggests a possible reason. It found that in 2024, gold eclipsed the euro as the second-largest asset reserve by the world’s central banks.
In its report, the ECB found that at the end of last year, gold made up nearly 20% of reserves, while the euro made up only 16%. The increase was the result of two factors – banks went on a buying spree and the price of gold continued to rise, in part because of those central bank purchases.
According to the Wall Street Journal, gold prices have risen nearly 62% since the start of 2024 on a combination of geopolitical uncertainty, market volatility, and central bank purchases and reached an all-time high of $3,509.90 a troy ounce in April. After adjusting for inflation, gold prices in 2024 surpassed their previous peak during the 1979 oil crisis.
Why are central banks adding to their gold reserves? In response to sanctions and financial system risks, many central banks are shifting toward gold to reduce dependence on the U.S. dollar.
According to the World Gold Council, banks added over 1,000 tons of gold to their reserves in 2023—the second-highest year on record—and 2024 continued that trend.
Inflation is also a factor
Inflation is another factor driving up the price of gold. While inflation has cooled from its 2022 peak, it remains above central banks’ targets in many countries. Simultaneously, markets are anticipating interest rate cuts in the U.S. and Europe later this year. The expectation of monetary easing has pushed investors toward gold as a store of value.
In addition to banks and institutional investors adding to gold positions, retail investors have also begun to put cash into gold ETFs. Gold ETFs have seen renewed inflows in 2025, after a brief lull in previous years. Meanwhile, retail demand—especially in Asia—remains strong.
Where does gold go from here? No one has a crystal ball. It’s a good idea to talk to a trusted and objective financial advisor before acting. In the meantime, Retirement Living researchers have identified some of the best gold IRA companies for you to consider.
