There’s a new gold rush and it’s showing no signs of slowing.
The price of the precious metal reached a record $US3,674 overnight, up from its previous high of $US3,636.
That’s around $5,560 Australian.
The gold price has now risen roughly 30 per cent over the year to date.
Any asset reaching a record high is noteworthy, but the recent surge in the price of gold is telling a dramatic story.
Investors seeking ‘insulation’ in gold vaults
IBV International Vaults London provides safe deposit box services, including for gold storage in Mayfair — an upscale neighbourhood in Westminster.
Its managing director Sean Hoey has seen business booming.
“We are seeing a sharp rise in clients purchasing both physical gold and precious metals in order to secure their investments, and an increase in investors choosing to immediately store assets in private vaults where they are protected, accessible, and insulated from broader market volatility,” he said.
Note the words Hoey chose here: “Immediately”, “protected”, “accessible”, “insulated” and “volatility”.
These words are synonymous with gold as a tradeable commodity, and they suggest investors are nervous about their financial futures and the outlook for the economy.
An employee handles a safe deposit box containing gold bullion in The Reserve vault, operated by Silver Bullion Pte Ltd, in Singapore April 10, 2025. (Reuters: Edgar Su)
There’s strong demand for financial products leveraged or exposed to the price of gold, too.
VanEck says its Gold Miners exchange-traded fund was the top-performing ETF in August.
ETFs are financial products that allow investors to buy some exposure to a particular asset class, like shares or gold.
“Gold miners were the strongest performers in August, led by solid operational results and sustained demand for gold,” VanEck Asia Pacific CEO, Arian Neiron said.
“Despite this strength, we believe the sector still offers meaningful upside potential.
“Gold miners have been trading at compelling valuations for years, and we are pleased to see investors now recognising that opportunity.“
US dollar loses its shine
At the heart of the recent surge in gold demand is the devaluation of the US dollar.
The dollar’s fall in value stems from concerns over the sustainability of US debt — that is, the ability of the US government to comfortably fund its spending, and the sheer amount of US dollars sloshing around the world.
In the past, global financiers have invested in or bought US dollars — this could be in the form of US government securities or bonds.
But the arrival of the Trump administration’s so-called “reciprocal” tariffs (and above-mentioned concerns) have led to interest in alternative stores of value.
“The surge in the gold price tells us that global investors are losing confidence in the US dollar, the prospects for the US economy and how US policy is being conducted,” InTouch Capital Markets senior analyst Sean Callow said.
“The sharpest gains in gold this year came in April on fears that capricious US tariff policy would damage both the US economy and global relations.
“Then again over the past month, as the White House has relentlessly attacked the Federal Reserve, with gold benefiting at the same time from weak US jobs data which has driven US interest rates lower, making gold more appealing,” Mr Callow notes.
He said some of the trend would be reversible, given the US economy should recover at some point and interest rates would start rising again.
“But gold will continue to find demand around the world from both central banks and small investors looking for an alternative to the greenback.“
Demand for both physical gold and financial products exposed to the precious metal have risen. (AAP: Dan Himbrechts)
The central bank interest in gold is significant — according the World Gold Council, central banks remain net buyers of gold, despite purchases moderating in July.
It suggests stagflation has become a threat to both the US and potentially, Australia.
Stagflation occurs when central banks, like Australia’s Reserve Bank, are forced to cut interest rates due to a rapidly slowing economy amid rising inflation.
It can leave economies with rising unemployment and inflation.
“Gold’s surge in 2024 and 2025 is telling us a lot about the macro economy,” Stockspot chief executive Chris Brychi said.
“Falling interest rates and a weaker US dollar have made [gold] more attractive, while global tariff uncertainty and record central bank buying have fuelled demand.
“It’s also flashing stagflation concerns, much like the 1970s when inflation stayed high while growth stalled, and gold was one of the few assets to soar.
“Central banks are diversifying away from US Treasuries and into gold, showing waning confidence in the dollar as the world’s safe haven.”
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Can the gold rush continue?
What happens next with the price of gold will depend, in part, on the value of the US dollar.
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Crucially though, it will also depend on how millions of investors across the globe, including central banks, view the stability of the global economy.
Much of that depends on the outlook for US inflation.
If price increases in the US economy accelerate, at the same time as economic growth slows, we’re in a whole world of trouble.
Overnight tonight,official US Producer Price Index data will be published.
It’s a key measure of wholesale inflation — or, the cost businesses face to stack their shelves.
The data will offer crucial clues on cost pressures feeding into consumer prices and could ultimately shape expectations for how far and fast the Federal Reserve moves on cutting interest rates.
Fingers crossed.