Gold price breaks $3,000 mark

The international price of gold has broken the $3,000/ounce mark for the first time in history. This is the third surge wave after World War II, following the first half of the 1970s and the second half of the 2000s. The background is that the dominant position of the US dollar is shaking. In the face of international political divisions, funds with nowhere to go are concentrating on gold as a physical asset.

Rising by nearly $1,000 in just one year

As an international indicator, the New York futures of gold (the most active settlement month) rose by $54.7 (1.9%) from the previous day on March 13 to $3,001.5. Since the beginning of 2024, it has risen by nearly $1,000 in just about a year. Compared with the beginning of 2000 (US$289.6), the increase is more than 10 times.

It is reported that gold has been used for decorations and religion since the Mesopotamian civilization around 6000 BC. After that, gold coins were born, but due to the high scarcity of gold, circulation was restricted. The British Currency Act of 1816 finally established the “gold standard” with gold as the standard of currency value. Countries began to use gold to prove the value of their own currencies, and central banks began to hold gold.

The first wave was the Nixon shock

The first wave of gold price increases did not occur until 100 years later. The cause was the Nixon shock in 1971, when the US government stopped the exchange of gold for the US dollar. After the end of the fixed exchange rate system, an exchange rate stabilization mechanism established with the United States as the center after World War II, the price of gold began to be determined by market supply and demand. The price of gold, which was fixed at $35 as of 1971, rose to $873 in 1980.

The second wave occurred in the 2000s. Problems in the United States, such as the bursting of the IT (information technology) bubble and the September 11 terrorist attacks in the United States in 2001, increased the attractiveness of gold, which has the nature of a “stateless currency.” When the Lehman Brothers crisis broke out in the United States in 2008, gold hit a new high since 1980, breaking through $1,000 for the first time.

In order to stabilize finance, the Federal Reserve (FRB) of the United States cut US interest rates by 4.75% in 2001. With the reduction of US interest rates, the attractiveness of gold has increased relatively, so it is easier to attract capital inflows. By 2004, as gold exchange-traded funds (ETFs) were listed in the United States, liquidity increased, which also promoted capital inflows from European and American institutional investors.

There is an increase in geopolitical risks behind it

What is happening now is the third wave. The background is the division of the world caused by the intensification of geopolitical risks. Russia, which invaded Ukraine in 2022, suffered economic and financial sanctions, and its dollar-denominated assets were frozen. Emerging market countries realized the risks of holding US dollar assets and moved further away from the US dollar.

Gold has become a beneficiary of this trend. Starting in 2022, central banks’ gold purchases increased to a record high of 1,000 tons per year. In the 1990s and 2000s, hundreds of tons were sold net each year, but since 2010, holdings have been increased for 14 consecutive years. After the demand from emerging market countries and other countries has increased, “the price of gold is not easily affected by rising interest rates.”

After entering 2025, the policies introduced by US President Trump have become a tailwind for the gold market. Not only because of the uncertainty of tariff policies, but also because large-scale tax cuts and the resulting US fiscal problems are shaking the credibility of the US dollar.

Ole Hansen, head of commodity strategy at Danish financial giant Saxo Bank, pointed out that “investors are increasingly worried about the overvaluation of the stock market due to accelerating inflation and trade tariffs, so the demand for alternative investments in gold is increasing,” and said that “due to the strong momentum of price increases, there is also a ‘fear of missing out’.”

Japanese market analyst Toyoshima Itsuki also pointed out that “under the Trump administration, the uneasiness about stock and bond investments has been increasing, and the trend of buying gold by elimination is strengthening among institutional investors.”

Individual purchases are also active in China and India

Individual purchases of gold are also active, mainly in China and India, which are culturally fond of gold. In India, consumer demand for jewelry, gold bars and coins will reach $61.6 billion in 2024, up 30% from the previous year, and China will also increase by 10% to $62.6 billion.

“By 2030, the spot price will reach $4,821,” predicts asset management company Incrementum AG. On February 17, Goldman Sachs Group of the United States also raised its expected price by the end of 2025 from $2,890 to $3,100, citing increased demand from central banks. Against the backdrop of increasing uncertainty in the world economy, gold’s glory is likely to continue for some time.