After spending more than six months in a bear market, gold is finally experiencing a comeback.
Prices began to recover in August from the roughly 25% loss the precious metal experienced from its Jan. 28 record high of $5,589.38 per troy ounce through its year-to-date low on July 16. Now, with many of the same factors responsible for gold’s multiyear rally resurfacing, investors and central banks are once again piling into the safe-haven asset.
Here’s what’s going on with gold prices.
Surging federal debt, weak U.S. dollar spark a flight to hard assets
On Aug. 18, the U.S. national debt officially surpassed $40 trillion, approximately $3.8 trillion of which has accumulated since the start of President Donald’s Trump’s second term. According to the nonpartisan Committee for a Responsible Federal Budget, the national debt now exceeds the gross domestic product for the first time since 1946.
Combined with a recurring deficit and government spending outpacing tax revenue, investor demand for U.S. assets — including stocks, bonds and Treasurys — has waned.
Compounding that issue is a weakened U.S. dollar. The value of the greenback has fallen by 13% since hitting its five-year high in October 2022, fueling a currency debasement trade — an investment strategy wherein funds are moved out of fiat money (like the U.S. dollar) and government bonds and into hard assets over fears that government debt and money printing will continue to erode a currency’s purchasing power.
Gold has directly benefited. Charles Schwab notes that catalysts including “tax cuts, COVID-era stimulus programs, military spending, the aging baby boomer population” and more have fueled speculation of de-dollarization and contributed to gold prices surging 185% from 2023 through their all-time high this past January.
Following a six-month correction for precious metal prices, those factors have resurfaced, providing a major driver for gold prices in late summer and beyond.
Geopolitical unrest and tariffs are also driving gold demand
In February, as gold began to pull back from its record high, Trump told The New York Times that the Iran war would last “four to five weeks.” But over six months later, investors are still dealing with supply chain disruptions as well as elevated prices for oil and other goods.
July’s consumer price index reading showed energy costs up 14.7% year over year. Headline inflation came in at 3.4% year over year.
Trump’s economic policies have also contributed to price increases. The president’s ongoing trade wars have indirectly driven gold demand as investors seek to avoid equity market volatility and assets adversely impacted by tariff-driven inflation.
As a historical hedge against inflation, gold has experienced substantial inflows as non-correlated safe havens increase in appeal.
After Trump announced new 50% tariffs on Canada, July ended with $3 billion in net inflows for gold exchange-traded funds (ETFs) following two months of net outflows. In August, amid renewed hostilities between the U.S. and Iran and inflation concerns emanating from the Canada trade war, gold-buying accelerated, resulting in a massive $17 billion in inflows that month.
Is now the time to buy gold?
In June, Jordan Rizzuto, chief investment officer at GammaRoad Capital Partners, told Money that rather than a protracted crash, gold’s performance “looks more like a correction,” adding that he didn’t believe the precious metal’s bull market story was over.
“If you look at the underlying long-term drivers for gold, they seem to still be in place,” he said.
Goldman Sachs’ analysts maintain a year-end price target of $4,900 per troy ounce for gold, or 9.87% higher than where the precious metal trades today.
“We continue to see elevated central bank gold accumulation as a multi-year trend, as central banks diversify their reserves to hedge geopolitical and financial risks,” Lina Thomas, senior commodities analyst at Goldman Sachs Research, and Daan Struyven, co-head of global commodities research, wrote in an Aug. 28 research note.
After a more than 11% gain since its year-to-date low on July 16, gold prices remain around 17% below their record high from January.
Investors looking to gain exposure can do so by buying the physical metal, diversifying their retirement plan with a gold IRA or — for those more comfortable navigating the equities market — by investing in gold miner stocks, gold miner ETFs or gold-backed ETFs that track the spot price of the precious metal.
No matter which way you approach the asset, investment professionals remain bullish on its future.
“[Gold’s] story is intact,” Rizzuto said. “We’re talking about the big picture. The decade-long view.”
