Gold markets have recently witnessed an unprecedented surge in prices, with the precious metal reaching record levels, reminiscent of the 1980s. In 1980, political and economic turmoil was one of the factors that contributed to pushing gold prices to historic highs. However, despite the apparent similarity between the current surge and that of that period, experts point out that the circumstances behind this current surge are fundamentally different.
Geopolitical Tensions and Their Impact on the Gold markets
Currently, we are witnessing a significant escalation in geopolitical tensions around the world, whether between traditional allies or due to military conflicts, such as the war in Ukraine and the conflicts in the Middle East. These tensions have increased investor interest in gold as a safe haven. However, according to analysts, the current situation differs from previous crises, as the world is not expected to witness rapid international cooperation to resolve the current crises. For example, US President Donald Trump’s imposition of a series of tariffs on US trading partners has had a significant impact on the rise in gold prices. James Steel, an analyst at HSBC, notes that this rise comes at a time of escalating trade tensions, which is driving investors towards gold.
Gold Markets in Current Context
Recently, the price of spot gold reached a record high of $3,167.57 per ounce, representing a significant 16% rise since the beginning of the year, in addition to a 27% increase in 2024. Despite market volatility, this rise appears to be supported by several fundamental factors, making it more sustainable than previous highs for the precious metal.
Among the factors driving gold prices higher are the escalating trade war and the ongoing threat of further tariffs. While the dollar is considered a safe-haven asset.
Compared to the 1980s
In this context, gold appears to be benefiting from instability, as the economic and geopolitical shifts taking place globally are pushing investors towards buying gold bullion.
Many analysts point out that the current rise in gold evokes memories of the precious metal’s rise in the early 1980s. During that period, the Iranian Revolution and the oil crisis were the main factors that pushed gold to its highest levels. However, the current situation differs from that of the 1980s in the absence of quick solutions to the crises. Experts believe that the geopolitical factors affecting gold prices today are becoming more complex, and there is little hope of international cooperation resolving them anytime soon.
James Steele also noted that events that contributed to rising gold prices in the past—such as the Iranian Revolution and the oil crisis—were quickly resolved, leading to a rapid decline in gold prices. However, according to Steele, the collapse of international cooperation in recent years has kept gold at high levels, indicating that geopolitical competition now dominates the market. Economic Factors Supporting Gold’s Rise
While the global market continues to closely monitor developments in geopolitical crises, we have also witnessed economic developments that have directly impacted gold prices. Over the past two decades, numerous crises, such as the coronavirus pandemic and the war in Ukraine, have strengthened gold’s position as a safe haven. Following Western sanctions freezing half of Russia’s foreign exchange reserves, central banks in non-Western countries have shown increased interest in gold as a means of diversifying their reserves away from the dollar.
In addition, the accommodative monetary policies pursued by many central banks around the world, along with growing concerns about fiscal deficits, have pushed investors toward gold as a relatively secure investment vehicle.
Geopolitical Threats and Tariffs
Since taking office, Trump has made radical shifts in US policy, ranging from questioning Europe’s security guarantees to changing the US approach to the war in Ukraine. These shifts, coupled with the ongoing threat of further tariffs on Chinese goods, have heightened expectations of worsening geopolitical crises, pushing more investors toward gold as a safe haven.
This has led to significant movements in gold markets, with prices of the yellow metal rising in recent months. Reports suggest that these gains could face pressure if economic conditions stabilize, especially if international cooperation expands and economic crises resolve.
Are gold’s record highs coming to an end?
While the price of gold remains elevated, some are concerned about its continued rise. Following Trump’s announcement of tariffs on trading partners, gold markets witnessed significant selling by some investors attempting to cover losses in the stock markets. These corrections could lead to short-term volatility in the price of gold. At the same time, central banks remain strong buyers of gold, contributing to long-term support for its prices. According to a World Gold Council report, central banks have continued to build their gold reserves over the past few months, indicating that interest in the precious metal will not wane anytime soon.
Ultimately, despite the pressure on gold prices due to tariffs and other economic pressures, the precious metal remains a safe-haven asset that investors turn to during times of turmoil. Although some forecasts indicate that the record price surge may end in the near future, ongoing geopolitical tensions and shifting economic policies could contribute to a longer-term continuation of this rally.
