Gold has long been viewed as a safe-haven asset, but in recent months, it’s been in the spotlight for a different reason: reaching record highs.
Gold touched an all-time high of USD $3,266 per ounce (AUD $5,143) this month, the culmination of five years of record growth. It's important for Australian investors, producers, and policymakers to understand what's driving the trend and the implications more than ever before.
The gold price is the quoted price per troy ounce in US dollars, but for Australia, the price in AUD is just as relevant since it is responsive to international and exchange rate movements. Over the past five years, gold has increased over 80% in USD/oz and over 100% in AUD/oz as a result of a declining Australian dollar.
World Gold Council, ‘Gold price averages in a range of currencies since 1978’
This rally has been far from straight-line: gold briefly dropped during the initial COVID-19 shock of 2020, rallied hard through the pandemic, and has since gained momentum amidst growing geopolitical tensions and economic uncertainty.
Now that prices have entered new ground, everyone is asking: What's actually moving the market? And how should we be thinking about gold today?
What Moves the Gold Price?
1. Geopolitical Risk and Economic Uncertainty
Gold tends to perform well during periods of heightened uncertainty, and the past five years have delivered no shortage of market-moving events. The global outbreak of COVID-19 in 2020 triggered a wave of financial market volatility and a surge in demand for safe-haven assets. This was followed by the Russia-Ukraine conflict, which introduced new geopolitical risks and disruptions to energy and commodity markets. Inflationary pressures in 2021–2022, combined with aggressive monetary tightening by central banks, further increased market sensitivity.
More recently, ongoing trade tensions between the United States and China have resurfaced as a key driver of global market sentiment. In 2024 and 2025, a renewed tariff standoff between the two nations affected a wide range of sectors, including pharmaceuticals and semiconductors, raising concerns over supply chains and broader economic stability. Taken together, these developments have reinforced gold’s role as a strategic asset for investors seeking to manage risk in an increasingly complex global environment.
2. Interest Rates and Monetary Policy
Federal Reserve Bank of St. Louis (FRED), World Gold Council, MacroTrends
Another key consideration is monetary policy. While higher interest rates typically squeeze gold (since it does not pay interest or dividends), the situation in 2025 is more nuanced. The U.S. Federal Reserve's target range of 4.25–4.50% is still tight currently, but markets increasingly are speculating about reductions later this year as growth slows and inflation eases (U.S. Bank, March 2025).
With low or negative real (inflation-adjusted) interest rates, the opportunity cost of gold falls, and people demand more of it. Here, too, the Reserve Bank of Australia confronts a corresponding challenge—mixing soft demand from consumers with sticky inflation. Under these conditions, gold profitably acts as a monetary hedge: it remains valuable when fiat currencies are susceptible to policy blunders or losses in exchange.
3. Demand by Central Banks
World Gold Council, Gold Demand Trends Reports (2015–2024)
Central banks have emerged as some of the biggest gold buyers in the world. In 2024, they bought 1,045 tonnes—one of the highest such totals ever—led primarily by nations such as China, Poland, Turkey, and India (World Gold Council). Their reasons are obvious: diversify out of the U.S. dollar, build up reserves, and build in some buffers in periods of monetary or geopolitical turmoil.
This is not symbolic. When central banks acquire in bulk, it sets a firm and price-insensitive base under the market. The People's Bank of China alone has increased its reserves by more than 200 tonnes over the last 12 months, which marks a clear shift towards hard assets and away from dollar-denominated instruments.
Why It Matters for Australia
A live gold pour at The Perth Mint
Australia is the world's third-largest gold producer and is home to some of the most technologically sophisticated and innovative mines. The impacts of high gold prices are real and immediate: higher revenues, increased royalties, and additional employment in regional economies.
In FY2023, gold was Australia's third-largest export, behind iron ore and coal, and contributed more than AUD $27 billion to the economy. With prices going even higher in 2025, that figure is poised to break new records. Gold mining companies, from major producers to junior explorers, are enjoying increased margins and renewed investor interest.
Local investor demand for gold is also building. Australian-traded gold ETFs like The Perth Mint's ASX:PMGOLD have seen strongly increased inflows in 2025, as physical bullion demand remains high, especially from Self-Managed Superannuation Funds diversifying portfolios and hedging against inflation and market risk.
What Should Investors Watch?
Beyond the direct drivers explored above, gold is also influenced by broader macroeconomic indicators that shape its short to medium-term price movements.
The gold price often moves inversely to U.S. bond yields and the strength of the U.S. dollar. In 2025, a weaker dollar and steady-to-declining yields have created favourable conditions for gold, but reversals in either could shift sentiment.
Inflation expectations also matter. If expectations remain anchored despite fiscal or geopolitical shocks, gold’s value as an inflation hedge could face pressure.
Volatility indicators (such as the VIX, credit spreads, or risk-off flows in equity markets) also impact gold. Periods of rising volatility and falling confidence in risk assets tend to benefit gold as capital rotates into defensive assets.
For Australian investors, currency movements add another layer of complexity. The AUD/USD exchange rate has a direct effect on the local price of gold. A weaker Australian dollar amplifies returns for local holders of gold, making currency exposure an important portfolio consideration.
Summary
Gold’s recent price performance reflects a range of global factors, including geopolitical developments, interest rate dynamics, and changing approaches to reserve management by central banks. These influences have combined to support demand across both institutional and private markets.
For Australia, these conditions highlight the importance of maintaining a competitive and resilient gold sector. The Gold Industry Group plays a role in highlighting the contribution of gold to the national economy and supporting greater awareness of the sector’s long-term value.