Has the gold rush come crashing to a halt? As prices plummet, investment experts reveal what to do if your savings are kept in the precious metal… or if you should snap it up now on the cheap
Did you join the great gold rush of the 2020s? Between January 2024 and January 2026, the price of gold rocketed by 174 per cent from around $2,000 an ounce (£1,500) to a record high of $5,589 (£4,185).
No wonder so many investors have piled in. In January alone, more than €2billion (£1.7billion) was poured into gold exchange-traded funds (ETFs) (which track the price of gold), according to investment data firm Morningstar.
But the gold rush has come to a crashing halt – the price has plummeted around 28 per cent from its peak in March and the precious metal is on course for its worst quarter in 13 years. So what happened, why is the price of gold falling so rapidly and what should investors do about it? We asked leading experts what they think the future of gold has in store.
The past year’s gold frenzy was initially driven by investors looking for a safe place to park their money during geopolitical uncertainty, starting with the Trump tariffs, through interest-rate uncertainty and the outbreak of war in the Middle East.
Central banks from around the world started buying the metal as a way to diversify away from the weakening US dollar and professional investors soon followed suit.
Jason Hollands, of Bestinvest, says there are several key factors that have sent the price of gold soaring. They include the freezing of Russia’s foreign exchange reserves, India’s decision to repatriate about 100 tons of gold from the Bank of England to its own domestic vaults and heavy buying of the metal by China.
Nicholas Ward, chief executive at Gold Bullion Partners, adds: ‘Gold soared amid a perfect storm of geopolitical unrest, rising inflation and economic uncertainty. It was a safe haven for investors seeking shelter from escalating global tensions.’
The upward trend attracted wider attention. Soon, normal investors were jumping on the bandwagon, but for many the decision to do so was based only on a hope that the price would continue to rise further and profits would follow.
Rob Morgan, chief analyst at Charles Stanley Direct, says the recent crash in the price of gold shows the commodity is not a ‘safe haven’ for investors after all
Those latecomers to the gold party will have been disappointed. The gold price is down about 28 per cent since the beginning of March, currently sitting around $4,000 (£3,000). And while the professional investors saw the early warning signs and moved their money to other assets, many retail investors are now sitting on a loss.
Tom Becket, co-chief investment officer at wealth manager Canaccord, says: ‘When gold was $2,000, it was considered antiquated and boring, but at $5,500 it was about the most loved asset in the world. It was pretty obvious at that point that gold had become wildly overbought and a serious correction was likely.’
Gold has historically been viewed as the ultimate safe haven asset. It’s often an insurance policy for an investment portfolio as its price tends to rise at times of uncertainty, when other assets such as stocks and bonds falter.
Why has gold now fallen? In part, because investors have sold their holdings to lock in the colossal profits they have made. This can start to cause a domino effect as selling causes the price to fall, prompting more people to sell.
The fact that central banks are now expected to hike interest rates also makes gold less appealing. Because gold pays no income, cash and bonds start to look comparatively more attractive when rates are higher. This is because you can get a guaranteed return from bonds or savings accounts.
The dollar has also strengthened, which is generally bad for gold, as it becomes more expensive for overseas investors to buy when the dollar rises.
But that doesn’t mean gold is stuck in a downward spiral. The days of stubborn inflation and geopolitical instability aren’t behind us yet, and this could stop gold falling much further as investors remain nervous. Central banks are expected to keep buying the metal, which should also help to underpin the price. Becket expects gold could recover to $4,500 (£3,369) before long. And even with the recent dip, it is still up about 25 per cent over the past 12 months, making it one of the strongest performing assets over that time.
Rob Morgan, chief analyst at Charles Stanley Direct, says: ‘Despite often being labelled a “safe haven”, the recent rollercoaster price action confirms that over short periods, gold is anything but. It tends to hold its value well, but only when you measure it in decades, not months or years.’
Ben Yearsley, co-founder of Fairview Investing, suggests choosing a fund that invests in the shares of gold mining companies, rather than investing in the metal itself
What to do from here depends on why you invested in the first place. Ward says: ‘A lot of investors get surprised by these dips and sell at the bottom. But if you own gold and find yourself at a loss, it is crucial not to panic.’
If you bought gold in the hope of making a quick buck and need the money short-term, then it might be better to cut your losses. If you bought to diversify your portfolio and hold for the long-term, then now could even be a good time to buy while the price is down.
While it’s hard to predict what will happen to the price of gold in the short-term, experts insist there is still a case for having a small portion of your portfolio (typically about 5 per cent) invested in the asset to provide some protection.
For those who do want to invest, the simplest way is through an exchange-traded fund (ETF), which is a low-cost fund that tracks the price of gold. Choose a fund that is ‘physically backed’ as this means it actually owns the metal. Hollands likes the Invesco Physical Gold ETC, which has annual charges of just 0.12 per cent, and is fully backed by gold bullion held in the London vaults of JP Morgan.
Ben Yearsley, co-founder of Fairview Investing, suggests choosing a fund that invests in the shares of gold mining companies, rather than investing in the metal itself. This way you can get exposure to the gold price but also receive dividends from the companies, to help boost returns.
BlackRock Gold & General is a popular option, investing in the likes of Barrick Gold, Newmont and Franco-Nevada. It has returned 149 per cent over five years. Keep in mind these funds can be riskier as the companies’ fortunes tend to fluctuate with the price of metal.
If you invest in physical gold, be sure to buy it from a legitimate source. The British Numismatic Trade Association (BNTA) and the London Bullion Market Association (LBMA) list reputable dealers. Read reviews and be wary of deals that seem too good to be true. Consider starting with coins, which are classed as currency so any profit is not liable for capital gains tax.
And if you’re looking to sell your gold holdings and put the money in something else, consider other commodities, whose demand is driven by real-world use cases, not just speculation. Copper, for example, is heavily in demand as it is used in semiconductor chips that are crucial in everything from phones to electric cars.
Elsewhere, so-called soft commodities, such as wheat and coffee, have been affected by disruption in global supply chains and changes to the global climate, which helps stoke demand and push up prices.
The Invesco Bloomberg Commodity UCITS ETF is one option here – it tracks a basket of commodity prices including gold, oil, corn and soybeans. It’s up 58 per cent over five years.
