More and more investors are turning to precious metals as global uncertainty persists. However, analysts warn that gold is not a fixed store of value.
The price of gold has surged by more than 15% since the start of the year, crossing the symbolic $5,500 threshold this week. The rise of the precious metal, accompanied by positive performance in other commodities like silver and platinum, is driven by a series of interconnected factors, including geopolitical tensions, rising public debt, and uncertainty surrounding interest rates and inflation.
The appeal of gold is tied to the narrative that it is a safe-haven asset, serving as a “hedge against inflation.” Typically, its value rises when the dollar weakens; it is easily sold and is a tangible commodity with limited supply. These factors carry extra weight at a time when questions are being raised about the strength of the dollar, as well as fiat currencies like the Japanese yen. As government debt grows, so do fears of inflation and fiscal stability.
In the U.S., the often inflammatory policies of the Trump administration are adding to market nervousness regarding the health of the economy, fueling what some analysts call a “Sell America” strategy. In recent weeks, the President has threatened the invasion of Greenland, hinted at U.S. intervention in Iran, attempted to influence Federal Reserve policy, and launched diplomatic attacks on Venezuela. Furthermore, he has warned of new tariffs on trading partners, bringing back a familiar tactic from 2025.
While analysts argue that the dollar will not lose its status as the global reserve currency anytime soon, it appears that investors are gradually diversifying away from the "greenback." Future U.S. moves remain unclear, and no one wants to be caught in the middle of the turbulence. In this context, gold is seen as an attractive alternative to fiat currencies.
“Previously, investors bought U.S. Treasuries because they were considered almost risk-free. But, especially because of how wealth has been ‘weaponized’ politically, some countries are becoming more cautious in how they allocate their capital,” said Simon Popple, managing director at Brookville Capital. “The devaluation of the dollar helps the price of gold,” he added to Euronews.
However, Popple and other analysts emphasize that a key factor driving gold prices is much simpler: momentum. As gold continues to dominate news headlines, investors get swept up in the excitement, fueling a buying fever.
“People are naturally drawn to assets they see rising, and gold has had an extraordinary run,” said Chris Beauchamp, chief market analyst at IG. “This inevitably ignites interest.” He added that while gold has useful investment properties, its ability to store value is overrated, especially in the short term. Gold’s market position changed significantly after former U.S. President Richard Nixon ended the direct convertibility of the dollar to gold in 1971. Simply put, countries no longer pegged their currencies to a specific amount of gold.
“The gold standard is still mentioned to suggest the metal is a totemic asset, a fixed store of value. But it is not,” Beauchamp concluded.
Kenneth Lamont, head of manager research at Morningstar, reinforced this message, comparing gold to cryptocurrencies. Although both have a limited supply, they are extremely volatile, he noted. “If you use crypto or gold to buy something, the value could be 30% lower from one day to the next. That doesn’t make it a good store of value in the short term.”
Even though gold is much more established than Bitcoin and has historically performed well in the long run, analysts emphasize that the unpredictability of both assets means fiat currencies are not at the end of the road yet.
On Friday, the precious metal had fallen about 3% in the early morning hours in Europe. Despite this correction, it seems gold may still have room for growth in the coming months, given the fragile nature of global politics.
