Gold price hits record £2,985 – what does this mean?

Gold has hit an all-time high, surpassing levels seen during the Covid-19 pandemic and the beginning of Russia’s full-scale invasion of Ukraine.

According to the Royal Mint, which makes coins, the price of gold today is more than £3,000 per ounce, the highest since records began in 1968.

Back then, the precious metal was worth £14.64, or roughly £215 in today’s money.

In the US, meanwhile, the value of American gold hit $4,000 for the first time in history yesterday.

After all, at US President Donald Trump’s inauguration, he did promise that the ‘golden age of America’ would begin.

So, we’re in a modern-day gold rush. But as one user on Reddit’s r/investing forum asked: ‘So, what is the deal with gold?’

‘Chat, is the civilisation about to collapse?’ the user asked. ‘I don’t think I’ve seen a parabolic gold price chart before.’

Metro spoke with experts about why the price of gold – that metal so deeply associated with wealth and luxury – and what it means for you.

Why should we care about the price of gold?

It’s safe to say that, for most people, gold isn’t something they think about.

But investors spend a lot of time doing just that, and that includes Adrian Ash, the director of the world’s largest online investment gold service, BullionVault.

He tells Metro that the gold trade starts in London, where banks and buyers store 12.5kg gold bars, called bullions, in secure vaults. The Bank of England is actually the world’s largest gold vault, storing 400,000 bars.

Every weekday at 3pm, an auction is held in the City, the capital’s financial hub, to figure out a price that balances supply and demand.

People in the financial world see gold as a ‘haven asset’, sought out by buyers looking for a safe investment.

‘Gold offers the classic hide-out, because it’s nobody’s to control or create,’ Ash says. ‘The stuff just sits there, doing nothing but storing value.’

The prices changing almost daily doesn’t mean that jewellery store owners are printing out new price tags every day.

‘Compared to those big bars in London, any other gold product – from coins to small bars, gold watches and necklaces – will cost you more to buy per gram of bullion, because they all add fabrication, shipping, and retailing costs after starting out in that wholesale form,’ Ash explains.

Why is gold increasing right now?

There are many reasons why gold is hot right now, but Ash can sum it all up in a single word: ‘Trump.’

‘This spring’s trade-tariffs chaos sent gold soaring when stock markets plunged,’ he says.

‘Now Trump is attacking the US central bank, the Federal Reserve, firing one policymaker, putting his own advisor on the team, and demanding that the Fed slash interest rates to juice the economy.’

The US government shutting down as politicians could not agree on a budget bill for federal services last month hasn’t helped either.

Central banks (financial institutions that manage monetary policy) are now seeing US assets, like the dollar or government bonds, as less alluring.

Since 2022, central banks have bought more than 1,000 metric tons of gold each year, according to the World Gold Council.

Jon White, who has been a professional gold buyer for 17 years, says the conflict in the Middle East is also pushing up gold prices.

‘In the UK, concerns over the Labour government’s economic policy have added a layer of domestic uncertainty, further encouraging investors to seek the perceived safety of gold,’ the director of Gold Traders tells Metro.

But what does it mean for you? Is the price of gold rising a good thing?

Well, not really, all experts Metro spoke with say.

‘Gold acts as a barometer of fear, uncertainty and doubt,’ Ash says. ‘So there’s little to celebrate in gold’s new all-time highs, especially if you are investing.’

Prices soared in the aftermath of 9/11 and during the 2008 financial crash, and hit previous record highs again during the pandemic.

Rajan Lakhani, a personal finance expert at the investment mobile app Plum, tells Metro the gold flush is also drawing investors hoping to make a quick buck as they’re worried their cash will lose value.

With people trusting money less, this could cause inflation to rise, which means that a pound coin buys you less today than it did yesterday.

‘While there is little to no direct impact on the cost of living, the rise in the gold price might also reflect concern about inflation not getting under control,’ Lakhani says.

‘For example, in the UK, inflation (3.8%) is almost double the Bank of England’s target of 2%, driven by higher food bills and utility costs, adding to our daily costs.’

Higher prices mean our rings, bracelets and necklaces will cost more, with gold jewellery costing about 50% more compared to last year.

Despite this, Dan Rennie, director at Rennie & Co, says the London jeweller has seen the strongest demand for gold since the 50s when it first opened.

‘With gold prices at such high levels, I think people feel that for important purchases, such as their wedding or engagement ring, they are prepared to push the boat out,’ Rennie says.

‘After all, it’s nice to be able to wear and enjoy something with intrinsic value.

‘We usually try to hold prices for as long as possible, but inevitably, there comes a point where we need to adjust and increase them.’

Customers are all too aware of this, Rennie says, noting that many couples used to pop in and take their time choosing their jewellery.

‘With current market volatility, many are moving faster to secure the price they are quoted before it rises further,’ he says.

What happens next?

White, of Gold Traders, doesn’t expect the recent gains in gold to end anytime soon.

‘We’ve sold around £5million of gold bullion in the past week alone and see no immediate sign of the market cooling,’ he says.

At the end of the day, however, gold going platinum this year is because, for most people, it’s been anything but their year.

‘While gold’s current surge might expose new buyers to a nasty shock,’ says Ash, ‘it’s hard to see the key factors behind gold’s underlying uptrend turning tail any time soon.’

Get in touch with our news team by emailing us at webnews@metro.co.uk.

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