Gold: Why Is It So Expensive Right Now?

The Current Surge

Gold has been on a remarkable run. In October 2025, it reached an all-time high of $4,058.98 per troy ounce, and earlier in April 2025 it had already set an intraday record of $3,500.05. Throughout 2024, gold broke price records in March, April, May, July, August, and September. The first four months of 2025 alone saw gains exceeding 27%.[1]

This isn't a flash spike. It's a sustained rally driven by a confluence of global factors that have collectively pushed investors toward the one asset humans have trusted for thousands of years.

Why Gold, and Why Now?

Gold's appeal comes down to a few fundamental properties. It's scarce: all the gold ever mined would fit into a cube roughly 22 meters on each side. It's durable: gold doesn't corrode or tarnish. And it's universally recognized as valuable across cultures and time periods. These properties make it the ultimate "store of value," particularly when confidence in other assets wavers.

The current surge is being driven by several reinforcing factors:

Central Banks: The Biggest Buyers

The most significant structural change in the gold market is who's doing the buying. Central banks, particularly those in emerging economies, have become major net purchasers of gold for the first time in decades.

China has been especially aggressive. The People's Bank of China has been adding gold to its reserves consistently, signaling a long-term strategic shift away from US Treasury holdings. Russia accelerated its gold purchases after Western sanctions following the 2022 Ukraine invasion demonstrated how dollar-denominated assets could be frozen. India and Turkey have followed similar strategies.

The World Gold Council reports a 13% year-over-year increase in demand for gold bars in Q1 2025, reaching 257 metric tons. When central banks buy, they're not trading; they're accumulating for the long term, which removes supply from the market.[2]

Adjusting for Inflation: The Real Story

Here's where things get interesting. Gold hit its previous nominal peak in 1980 at $850 per ounce. That sounds quaint compared to $4,000, but in inflation-adjusted terms, $850 in 1980 equals roughly $3,493 in 2025 dollars. For decades, the 1980 peak represented the "real" high water mark that gold never quite reached again.[3]

That changed in 2025. At over $4,000 per ounce, gold has finally surpassed its 1980 inflation-adjusted peak. This is a new all-time high in real terms, not just nominal terms. The inflation-adjusted gold price reached approximately $4,389 in late 2025.

This context matters. At current prices, gold is trading at roughly 4-5 times its long-term inflation-adjusted average. Whether that represents a new normal or an unsustainable peak depends on how you interpret the structural changes in the global economy.

A Brief History of Gold Prices

Understanding today's prices requires understanding how we got here.

Pre-1933: Gold was money. The US dollar was defined as a fixed weight of gold ($20.67 per ounce), and citizens could exchange paper currency for gold coins. Prices didn't really fluctuate because the government fixed them.

1933-1971: President Roosevelt banned private gold ownership in 1933 and revalued gold to $35 per ounce, effectively devaluing the dollar by 40%. This price was maintained through the Bretton Woods system until 1971, when Nixon "closed the gold window" and ended dollar-to-gold convertibility.

1971-1980: Once gold could trade freely, it soared. Inflation raged through the 1970s (oil shocks, Vietnam War spending, loose monetary policy), and gold became the go-to inflation hedge. It peaked at $850 in January 1980 before crashing.

1980-2000: A brutal bear market. Central banks sold gold, inflation was tamed by Paul Volcker's aggressive rate hikes, and equities entered a massive bull market. Gold bottomed around $250 in 1999. Warren Buffett famously dismissed it: "Gold gets dug out of the ground in Africa, gets shipped to Fort Knox, then we dig another hole, and bury it again."

2000-2011: The tide turned. The dot-com crash, 9/11, the Iraq War, and the 2008 financial crisis all boosted safe-haven demand. Gold rose from $280 to nearly $1,900 by 2011.

2011-2020: Another consolidation. With the financial crisis contained and stocks rallying, gold drifted sideways, falling as low as $1,050 in 2015.

2020-Present: COVID-19 changed everything. Unprecedented money printing, zero interest rates, and supply chain disruptions reignited inflation fears. Gold broke $2,000, then paused, and then accelerated dramatically in 2024-2025 as the factors described above aligned.

Gold vs. Other Assets

Gold is often criticized for generating no income. It just sits there. Stocks pay dividends, bonds pay interest, real estate generates rent. Gold's only return comes from price appreciation, and over the very long term, it barely keeps pace with inflation. That's essentially what it's designed to do.

But that criticism misses the point. Gold isn't supposed to generate returns; it's supposed to preserve purchasing power during chaos. During the 2008 financial crisis, gold rose while nearly everything else collapsed. During the 1970s inflation, gold massively outperformed stocks and bonds. It's insurance, not an investment.

The recent rally reflects a world where investors feel they need more insurance:

• US government debt has ballooned past $34 trillion
• Geopolitical tensions are rising, not falling
• Confidence in central banks' ability to manage inflation has eroded
• The international order is fragmenting, with countries seeking alternatives to dollar dependence

What Could Bring Gold Down?

Gold isn't a one-way bet. Several factors could halt or reverse the rally:

• Higher real interest rates: If the Fed raises rates aggressively (or cuts less than expected) and inflation falls, gold's opportunity cost increases
• Geopolitical de-escalation: Peace in Ukraine, calmer US-China relations, or Middle East stability would reduce safe-haven demand
• Dollar strengthening: Gold is priced in dollars; a stronger dollar makes it more expensive for foreign buyers
• Central bank selling: If emerging market central banks reverse course and sell reserves
• Cryptocurrency adoption: Some argue Bitcoin is "digital gold" and could absorb demand (though this remains contentious)

Is Gold Overvalued?

There's no earnings multiple or book value for gold. Valuation is purely a question of what people are willing to pay, which makes it notoriously difficult to analyze.

Bulls argue that the structural shift (central bank buying, de-dollarization, fiscal unsustainability) represents a new regime. They point to gold's long-term average of around $900-1,000 in today's dollars as artificially depressed by decades of fixed prices and central bank suppression.

Bears argue that at 4-5 times the historical average, gold is in a speculative bubble. They note that every time gold has spiked to extreme levels (1980, 2011), it subsequently crashed and took years or decades to recover.

The honest answer is that nobody knows. Gold's price is ultimately a referendum on confidence in governments, currencies, and the global order. If that confidence continues eroding, gold could go higher. If stability returns, it could fall substantially.

"Gold is a way of going long on fear." — Warren Buffett

Right now, there's plenty of fear to go around.