What’s driving the big ascent in gold

The price of gold is up dramatically in 2025 (some estimates say +40 % or more).

Here are the key fundamentals underpinning it:

Weakening U.S. dollar: Gold is priced in dollars, so when the dollar falls, gold tends to rise.

Expectations of lower interest rates / lower yields: When real interest rates (interest minus inflation) fall, gold becomes more attractive because it doesn’t earn yield itself.

Geopolitical & economic uncertainty: Wars, trade tensions, concerns about central bank independence — all increase demand for “safe” stores of value.

Central bank buying & structural demand shifts: Many central banks are increasing their gold reserves even at high prices, which suggests the demand isn’t just speculative.

Inflation / currency debasement concerns: Some investors see gold as a hedge against inflation or fiat-currency risks.
stansberryresearch.com

So yes — there are strong structural and macro-factors supporting the rally (i.e., it’s not obviously just a bubble based purely on speculation).

⚠️ So, is the rally “flaky”? (i.e., likely to reverse, or risky)

Here are the caveats suggesting that while the rally is built on real factors, it does carry risks and may not proceed smoothly.

Valuations are lofty: Gold is at record high levels. Some of the forecasts being pushed now are very bullish (e.g., $4,000+ per oz) which means a lot of the upside may already be priced in.
CBS News

Dependence on macro tailwinds: If interest rates rise again, or the dollar strengthens, or a geopolitical shock resolves, the drivers could reverse.

Correlation behaviours changing: Some analysts point out that gold is moving in tandem with stocks recently (which is unusual for its “safe-haven” role) — this suggests it might be more driven by general market sentiment than its traditional hedge role.

Risk of “you’ve missed it” sentiment: When an asset has already had big gains, new investors may be stepping in at the top and increasing risk of sharper corrections. The “FOMO” (fear of missing out) factor can amplify both up-moves and down-moves.

So in short: It’s not purely speculative fluff — there are good reasons for the rise — but yes, it carries real risk of correction and is somewhat dependent on favourable macro conditions continuing.

🔍 My view: Where does that leave us?

If I were to pick a word: “structurally supported but tactically vulnerable.” The fundamentals support a higher gold price over the medium term, but the rally could stall or correct in the short term.

If you’re thinking of investing (or already invested) in gold:

Consider your time-horizon: gold may do well over years, but might fluctuate in months.

Don’t assume it will always go up linearly — keep in mind the risk of reversals.

Diversification still matters. Don’t treat gold as a guaranteed “safe bet.”

For the UK (and Europe) investor: check local currency effects (GBP) and storage/costs if buying physical gold, or fees if via ETF.