At the beginning of the week, the price of gold reached a new record high of over $4,500 per ounce. But the price of silver also broke records, dragging other metals such as platinum, palladium and copper along with it.
The security mode controls
Behind the boost lie several factors, of which the geopolitical situation with the war in Ukraine in focus is the most important, according to Robert Bergqvist.
The price of gold started to skyrocket when Russia invaded Ukraine in 2022. It is very clear that it is gaining momentum there. My explanation is that it is very much driven by central banks who have increased their interest in owning gold and putting it in their foreign exchange reserves. A number of countries are afraid of ending up in the same position as the Russian central bank, with frozen assets and sanctions.
An example is China, which has a large portion of its foreign exchange reserves, equivalent to approximately $2 trillion, in US assets.
There are rumors that China is acting on the gold market to make itself less dependent on the outside world. But we also see other central banks acting in this way, he says.
The interest rate is competitive
The other major factor driving metal prices is the US Federal Reserve's cuts to the key interest rate, according to Bergqvist.
Gold has the disadvantage that you do not get a running return in the form of interest. So interest rates are a competitor to gold - the higher the interest rate, the less attractive gold becomes. When the most important interest rate in the world goes down, gold's relative disadvantage against an interest-bearing asset decreases.
Lingering concerns about inflation also mean that many see gold as an inflation hedge that retains its value. There is also a slight distrust of the monetary system, he says:
It's not a big factor, but it's there in the background. It's been driven by negative interest rates, high public debt, and other economic experiments in recent years.
The dramatic rise in the price of gold has also raised concerns about a bubble - and then other metals can act as substitutes, driving up prices for these as well.
Many believe that the development will continue in 2026.
