There are few elements that are as significant as gold. Though inanimate, this metal is, to this, day tremendously influential. It has played many roles in economies throughout history and in recent years it has once again returned to the forefront of finance; only this time its value has never felt so obscured.

First and foremost – setting aside jewellery, coinage and other applications within industry – the value of gold is, well, that it is valuable. No matter its 'true uses’, or the history behind its ascension to the gold standard of safe haven assets, through the financial lens gold is viewed as something akin to an ‘ultimate store of value’.

Rational or not, this status underpins financial systems and appeals to investors across the world. To investors and central banks alike, gold is the first thing that comes to mind when considering a fiat-currency alternative or a nuclear bunker in which to store wealth. Recently, both gold-exclusive services have been called upon – along with a new source of demand: a retail frenzy. This explosive combination has pushed the price of gold to astronomic heights but has also shrouded the ‘true value’ of gold in mystery.

Unwinding the Golden Threads

What is often referred to as the gold market and its price movements often grossly generalises the complex dynamics that make it up. In fact, part of the reason why the market feels muddy is a consequence of its very design. Paper gold – that which is most bought by retail investors – is the ‘deed’ to gold, but no metal actually changes hands. The fact that practically no one ever requests this gold, and the deeds are instead almost entirely settled in cash, allows the banks selling these deeds to sell more deeds than they have gold to satisfy. This distortion of supply forces artificially deflates the price of gold, whilst unprecedented access to gold markets lets retail mania inflate it. This creates the first layer of detachment between the spot price of gold, and its ‘true value’.

Despite retail demand’s ability to move the price, it is the purchasing of gold by central banks that results in movement of the metal. This more tangible flow of gold is sometimes named as the culprit behind the gold price rally, but this stance lacks evidence. To an extent this can be explained due to data absence and time lags surrounding central banks’ gold purchases. Whether it is responsible for the price reaching all-time highs in January of 2026 or not, it is certainly true that central banks have been purchasing vast quantities of gold. Consequently, the metal has now dethroned US government bonds as the number one reserve asset held by central banks.1

This composition change is a product of two forces: the appeal of gold as a resilient store of wealth in times of conflict and uncertainty; and an attempt to move away from US-currency dependence by central banks across the globe – a move referred to as the ‘debasement trade’.1 Thus, wars and a more unstable US – both in monetary and geo policy – have fed this mechanism and fuelled record gold purchases by central banks.

Rationalising the Rush

Due to a few years of unusually high central bank gold purchases and a retail speculation frenzy, gold more than doubled in value between January 2024 and January 2026, reaching a record high of almost $5,600.

Naturally, in periods of uncertainty that would justify the historically high price, one would expect to see bond markets and currency markets reflect similar stresses. However, comparatively stoic bond yields and steadfast currency markets indicate that either buyers of gold are shouting about risks that do not exist, or bonds and FX have plugged their ears. Robert Armstrong at the FT put it nicely:

"to rationalise the gold rally, you have to believe that the bond market is lying to you, that the world is becoming a much worse place than any time in the past 50 years, or both." 2

Moving further into 2026 however, the relentless rise of gold prices has come to a halt and the scales have begun to tip the other way. Since January 2026, gold prices have fallen around 25%. The forces seem to be the same, just opposite: gold ETF outflows have ramped up massively,3 and proxy data indicates that, as a collective, central banks have eased up on purchases.4

As a store of value that is independent from industry, gold tends to hold its value well in times of recession – rising around 15% on average – as well as periods of inflation and market stress.5 However, some argue that recent volatility has called its status as a safe haven asset into question. Gold showed brief resilience at the start of the Middle-Eastern war, even as investors began to sell equities and bonds, but a series of forces seem to be weighing down on the metal.

Mercurial retail

Firstly, the new imposing force that is the retail sector is adding significant volatility – which may be here to stay – and, over the past few months, has begun moving money out of gold ETFs.

Gold Warsh-out

Secondly, gold may be caught up in the new hawkish Fed chair’s inflation-vendetta. As a non-yielding asset, interest rate hikes tend to make treasuries and bonds comparatively more appealing for investors – dragging gold down. Some also point to uncertainty around the Fed and the decline of the ‘debasement trade’ as other sources of downward pressure.

Cashing in

Thirdly, the meteoric rise in value of gold coupled with the various troughs of the stock market has made the selling of gold to raise funds and cover losses an attractive prospect for institutional and retail investors. Indeed, this is an important caveat with gold, which an analyst at StoneX referred to as the “safe haven trap”: when stocks and bonds fall, investors tend to “cash it in to raise funds” – bringing gold down too.3

Bullish on Bullion

Conversely, in a recent piece for the FT, Suki Cooper (the global head of commodities research at British multinational bank, Standard Chartered) defends gold’s safe haven status: “there are a host of reasons that support the argument that gold prices should be higher” she writes. Cooper acknowledges the opposing forces to a bullish stance, but points to “recession risks” and “stagflation fears” as factors that are yet to be “priced in”. Cooper’s counter to the negative narrative ends by admitting that “its path is unlikely to be linear” but reaffirms that the “compass for the gold market still points north”.

A Golden Opportunity?

It is important to note that gold itself is no stranger to bubbles – 1979-80 and 2011-12 come to mind. However, its performance during the 2008 financial crisis (where its price movements were indeed non-linear), along with various macroeconomic and geopolitical drivers, make gold an attractive panic room for investors looking for shelter from uncertainty, and fearing a looming AI bubble bursting.

Conflicting narratives and new dynamics make the path ahead opaque. If a safe haven asset’s trajectory is unpredictable and volatile, then can it still be considered as one? But then again, if the future is unclear and risk-ridden, what better place is there for your money than gold?

Desperate hands may get burnt

The mechanics of the market may have warped and twisted, but the underlying driver remains unchanged: when the financial world fractures, investors reach for something solid.

Unfortunately, fearful hands are no longer grabbing on to the simple, static safe haven of the past; today, it is as complex and volatile as the financial system it is meant to protect against.

Footnotes

  1. Financial Times (opens in a new tab), Gold replaces US Treasuries as world’s top reserve asset, ECB says, 2nd June 2026. 2

  2. Financial Times (opens in a new tab), Trying to change our minds about gold, 27th January 2026.

  3. Financial Times (opens in a new tab), Tumbling gold price puts ‘haven’ status in doubt, 25th March 2026. 2

  4. Financial Times (opens in a new tab), Who’s been buying all the gold?, 27th January 2026.

  5. Financial Times (opens in a new tab), Reasons to be bullish on gold, 26th April 2026.