Gold has been significant throughout history for its use as a store of value and means of exchange. Nowadays, it’s not just valued for its aesthetic appeal in jewelry; it’s also viewed as a safe asset. This makes it an appealing investment, especially during economic downturns. Moreover, it’s often regarded as a safeguard against inflation and currency depreciation, since its value isn’t tied to a specific issuer or government.

Central banks hold the largest amounts of gold. They usually acquire it to bolster their currencies during uncertain times, diversify their foreign exchange reserves, and enhance perceptions of economic strength. For instance, in 2022, central banks added 1,136 tonnes—worth around $70 billion—to their reserves, marking the highest annual acquisition on record. Countries like China, India, and Türkiye have been notably increasing their gold reserves.

Gold’s price often moves inversely to the US dollar and US Treasuries. Typically, when the dollar declines, gold prices tend to rise, which allows for diversification during turbulent periods. Conversely, a robust stock market can suppress gold prices, while drops in risky assets can boost demand for gold.

Several factors can cause fluctuations in gold prices. For instance, geopolitical tensions and fears of significant recession can rapidly elevate gold’s price due to its safe-haven appeal. Generally, gold tends to rise when interest rates decline, although increased costs can exert pressure on it. Ultimately, much depends on the behavior of the US dollar, given that gold is priced in dollars. A strong dollar can lower gold prices, while a weaker dollar often has the opposite effect.