Fears Drive Up the Price of Gold

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Editor’s Note

Gold has surged past the $3,000 per ounce mark, a historic milestone driven by investor demand for stability amid economic uncertainty. This rally underscores gold’s enduring role as a haven asset.

Gold Breaks Through $3,000 Barrier

The price of gold climbed another step and broke through the psychological barrier of $3,000 per ounce for the first time on Friday (March 14, 2025). Since the beginning of the year, the price of gold has already increased by more than 13%.

The cause: when times are uncertain and future prospects become gloomier, many people fear for their money. Investors often react with the same reflex: they seek crisis-proof investments. Gold retains its value no matter how high inflation is, is secure during monetary reforms, and is immune to exchange rate fluctuations.

The Trump Factor

The search for the causes of the current surge in precious metal prices leads precisely to the United States. Like many other specialists, Frank Schallenberger, the commodities expert at Landesbank Baden-Württemberg (LBBW), is clear about who is the main culprit.

“The main reason for the rise in the price of gold is undoubtedly the current tariff policy of the United States, which generates uncertainty in the financial markets and, consequently, gold is once again in demand as a ‘safe haven’,” he says in an interview with DW.

Commerzbank commodities analyst Carsten Fritsch agrees, adding a name:

“The main reason for the sharp rise in the price of gold is the uncertainty surrounding the tariff policy of US President Donald Trump,” he says.

He explains to DW that “the usual factors, such as the evolution of the US dollar and expectations about interest rates, have not played a relevant role in the current price increase.”

Central Banks Seek Gold

There are many interested parties in gold: private individuals who want to keep their savings safe, institutional investors who no longer generate significant returns and want to invest their money in precious metals, and even national economies. According to Commerzbank economist Fritsch, central banks may have “supported the price increase” through massive gold purchases.

Concerns about the risk of financial sanctions are often a reason for central banks to buy gold. This also applies to emerging countries. There is concern about suffering particular disruptions in world trade or becoming embroiled in conflicts between economically stronger countries. According to Goldman Sachs Research, gold purchases in these countries have increased significantly as a result of sanctions following the Russian invasion of Ukraine.

The End in Sight?

The World Gold Council (WGC), a gold mining industry lobby group, paints a cautiously optimistic picture of the near future.

“We expect central banks to continue setting the pace in 2025 and more investors to invest in gold exchange-traded funds,” WGC expert Louise Street told Manager Magazin. However, “weakness in jewelry is likely to persist, as high gold prices and weak economic growth reduce consumers’ purchasing power.”

The end of the bull market is already in sight, says Frank Schallenberger. There will surely be profit-taking soon.

“As the year progresses, relatively weak jewelry demand and a slight decrease in coin and bar demand, as well as in central bank gold purchases, will likely cause gold prices to fall again,” the LBBW expert predicts to DW.

His colleague Carsten Fritsch from Commerzbank also forecasts the end of the boom. This will be driven by a drop in gold demand in China and India, which will slow down notably in this context of record price levels. Since “these two countries together account for more than half of private gold demand,” he notes.

Central banks will play an equally decisive role in the medium term, he adds:

“Given that interest rate cuts are coming to an end, the price of gold is likely to soon lack another of its important supports.”
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⏰ Published on: March 14, 2025