Gold has taken centre stage in recent economic developments, as its value has risen steeply. Since the beginning of 2024, gold prices have increased by more than 60 per cent, reflecting the growing demand from both investors and central banks.

The historical significance of gold as a store of value remains indisputable. For over 5,000 years, gold has been used as currency and an investment asset, with records appearing in ancient civilisations like China, Persia and Egypt. Although the global financial system has shifted to fiat currency, gold’s value remains strong due to its scarcity and the trust it inspires among investors.

According to the World Gold Council, only 215,000 tonnes of gold have ever been mined, with an additional 3,500 tonnes added annually. This limited supply helps preserve its value, making gold a key hedge against inflation, as well as monetary and geopolitical instability.

Extracting these few thousand tonnes each year is a massive undertaking: most mined ore yields only 1 to 4 grams of gold per tonne of earth in low-grade deposits, while medium-grade yields range from 4 to 8 grams, and high-grade ores can exceed 10 grams per tonne. It, therefore, takes processing hundreds of tonnes of earth to recover, on average, just a single kilogram of gold – making the metal quite rare.

The current period characterised by economic uncertainty has further boosted demand for gold as a safe haven asset. The recent causes of instability are multiple: geopolitical conflicts like the war in Ukraine and tensions in the Middle East – particularly the recent clashes between Israel and Iran – have disrupted global trade.

At the same time, protectionist US-China trade policies, persistent inflation and the climate crisis affecting raw materials all add to the level and impact of uncertainty.

As a result, central banks – especially in emerging markets – have increased their gold purchases since 2022, contributing to rising prices.

Additionally, the trend of de-dollarisation, that is the gradual reduction in dependence on the US dollar, has led many countries to bolster their gold reserves.

China’s central bank has played a pivotal role in this trend, increasing its gold reserves to 2,292 tonnes in the first quarter of 2025.

At the same time, it has reduced its holdings of US government bonds, decreasing its exposure to the dollar and strengthening the diversification of its reserves. This strategy reflects the growing uncertainty surrounding the sustainability of US debt, which has surpassed $35 trillion.

Forecasts remain optimistic, with analysts estimating that gold prices could reach $3,700 per ounce by the end of 2025. However, history shows that gold prices can fall just as quickly as they rise, especially if investors start to secure profits after such a sharp increase.

At any rate, in a world of uncertainty, gold continues to be a cornerstone of the global economy, offering stability and security to investors.

Andreas Charalambous and Omiros Pissarides are economists and the views they express are personal