Geopolitics & Gold: How Global Events Shape Prices

Gold’s value tends to rise in periods of uncertainty. Investors see gold as a haven asset – a storm-friendly “port” since it traditionally maintains or appreciates its value when markets collapse. As one expert explains, the saying “when in doubt, turn to gold” attests to its history of steadfastness under pressure.  Unlike typical portfolio hedges, the gold price in response to global events is highly valued for excellent protection in times of crisis. Geopolitics and gold prices are directly proportional, as when geopolitical tension rises, gold prices climb upwards.

As per data, gold reached record highs during 2025 (approximately USD $3,266/oz, AUD $5,143) as the trade tensions and economic concerns at the global level increased. Essentially, significant geopolitical or economic shocks are likely to prompt investors to turn to gold, driving the price upward. Reportedly, demand for gold during the financial crisis has shown a surge, hinting at the market behaviour, especially during times of crisis.

Key Drivers of Gold Prices 

Global Uncertainty: Political and economic instability (e.g., elections, sanctions, pandemics) increases demand for havens. Research and market literature repeatedly discover that gold does better when uncertainty surges. For instance, the World Gold Council reports gold’s rally gathered momentum in the face of increasing geopolitical tensions and economic uncertainty (This was true even during COVID-19: gold recovered rapidly in 2020 while equities fell.) Even the impact of wars on gold prices cannot be unseen. Not to mention, during the Russia-Ukraine war, uncertainty and sanctions made investors rush to buy gold, causing a higher demand and thus a higher price.  

Trade Disputes and Tariffs: Trade wars induce economic drag and market volatility, which in turn support gold. In recent history, repeated US–China tariff battles and US trade policies have pushed gold higher. In March 2025, Reuters had gold breaking above $3,000/oz “as investors piled on to a historic rally in the safe-haven asset to seek cover from economic uncertainty sparked by … tariff war.” Likewise, as new US tariffs in 2025 were being announced, gold recorded its highest quarter since 1986. The rising trade tensions have consistently served to trigger gold rallies. Thus, the trade disputes ‘ impact on the gold price is inevitable.

Interest Rates and Inflation: Gold is considered a hedge against inflation. As inflation devalues money, investors move towards hard assets. For instance, during the 1970s’ stagflation, gold prices surged as investors sought protection against the eroding purchasing power of their money. Now, with inflation and gold prices over target and interest rates elevated but real yields low, gold’s attractiveness is still strong. Analysts observe that negative real interest rates (when yields are outpaced by inflation) make gold particularly appealing.)

Monetary Policy and Central Bank Operations: Central banks’ gold reserves and monetary policy fluctuations are enormous drivers. Central banks are now net gold buyers: in 2024, they bought a record ~1,045 tonnes. Much of that demand originates in nations diversifying reserves away from the dollar. Reuters quotes analysts reporting banks “continue [record-level gold] purchases, attempting to diversify away from a more volatile U.S. dollar”. This persistent purchasing generates a firm price floor. Policy actions such as interest-rate reductions are also significant.

Implications for Australia 

Global gold trends significantly impact Australia. As one of the world’s leading three gold producers, Australia’s economy gains from an increase in prices. During FY2023, gold was our third-largest export (~A$27 billion). Increased global prices mean increased revenues, royalties and mining jobs in mining areas. Australian investors benefit too: since 2018, the gold price has risen ~100% in terms of AUD, due to both the bullion rally and a depreciating AUD. For instance, when there was the 2025 tariff scare, the USD gold price rose sharply, and with the AUD range-bound, the AUD gold price briefly reached fresh highs.

Reserve Bank policy measures have a part to play as well: an RBA rate cut in early 2025 was more or less fully priced and had only modest additional impact on gold. At the same time, a surprise RBA move might influence local demand for gold. Notably, Australian demand for gold has increased.

Australian gold ETF and mint product inflows are reported to be strong by the Gold Industry Group during 2025, as savers and superannuation funds employ gold to protect themselves against inflation and market risk. Overall, international shocks (trade wars, inflation, Fed action) are passed through locally via commodity prices and currency movements, so global developments are equally relevant to the Australian gold market.

Final Thoughts

Gold has always responded to economic signals, whether it’s inflation data, interest rate shifts, or currency moves. By watching these key factors or global uncertainty and gold price trends, you’ll be better placed to understand where prices may head next, both globally and here in Australia. And if you’re considering how gold fits into your strategy, Gold Secure is here to guide you.

FAQs

1. How do wars affect gold prices?

Wars are uncertain events that compel investors to seek safety in gold. This generally makes gold prices rise.

2. Why is gold a safe-haven asset?

Gold is a store of intrinsic value that is not attached to a government or currency. That makes it a safe repository of wealth during troubled times.

3. What are some historical examples of gold in crises?

During the Russia-Ukraine war and the 2008 financial crisis, gold prices rose. Investors flocked to it when markets and currencies collapsed.

4. What is the effect of Central Bank actions on gold?

When the central banks curbs down their interest rates or purchase gold, demand for gold increases and prices firm. Tight monetary policy can exert downward pressure.

5. What does gold do in a recession?

Recessions tend to increase the demand for gold as individuals seek stability. Yet, in steep downturns, short-term selling can lead to price declines.

6. Does inflation increase gold prices?

Yes, inflation usually increases gold since it safeguards buying power. It is regarded as a protection against currency depreciation.