Gold inches towards $3,000 – but is a correction on its way?

The price of gold is closing in on an unprecedented $3,000 per ounce, as geopolitical upheaval and fears of a full-blow global trade war continue to strengthen demand for the safe haven investment.

Gold was on track for an eighth consecutive week of gains on Friday, despite weakness in early trading, as investors continue to dismiss US dollar strength and the continued outperformance of the world’s largest economy.

The spot price was down 0.4 per cent by late morning from an earlier high of $2,949.83, but gold remains the best performing asset class so-far in 2025 with a return of 11.6 per cent year-to-date.

Gold has now added 44.6 per cent over the last 12 months, having traded below $2,000 as recently as November 2023.

Kristina Hooper, chief global market strategist at Invesco, said: ‘Geopolitical uncertainty – driven by concerns about a tariff war created by the US – has driven demand for gold’s ‘safe-haven’ qualities.

‘Other demand drivers include concerns about excessive fiscal spending in the US, price-insensitive central bank buying, and more vehicles for investors to purchase gold.’

Is gold due a sharp correction?

The long gold rally, which has seen prices continue to smash through all-time highs, has some investors fretting over a potential reversal.

Hooper said gold prices could begin to fall back if central banks ease-up on purchases or a US peace deal is enforced on Ukraine, but predicts ‘the direction of travel for the price of gold is most likely up’.

She added: ‘The European Union would likely feel threatened [by an enforced peace] and perceptions of geopolitical risk could even rise as a result of any peace deal negotiated exclusively between the US and Russia.’

Meanwhile, US President Donald Trump has continued to unsettle investors and this week revealed plans for fresh tariffs coming over the next month or sooner.

Trump wants to add lumber and forest products to previously announced duties on imported cars, semiconductors and pharmaceuticals.

David Morrison, senior market analyst at Trade Nation, said: ‘There’s the uncertainty surrounding the actions of the Trump administration, with the possibility that tariffs, deregulation and tax cuts add to inflationary pressures.

‘Couple that with Trump’s hostile attitude to President Zelensky of Ukraine, and his cosying up to Russian President Putin, and suddenly gold looks attractive as a potential ‘safe haven’ away from ‘overvalued’ US equities.’

Gold is typically seen as a hedge against macroeconomic risk and inflation, but higher interest rates – in theory – dampen the appeal of the non-yielding asset.

Federal Reserve officials, who have been under pressure from Trump to speed up the pace of interest rate cuts, are keeping a close eye on the potential inflationary impact of the President’s trade, immigration and other policies.

Higher US inflation, which hit a seven-month high last month, could keep rates higher for longer – if the President doesn’t get his way.

UBS strategist Joni Teves wrote in late January: ‘Bullish gold views seem well entrenched and there is likely plenty of FOMO (fear of missing out) from last year.

‘Gold continues to defy the negative pull during bouts of dollar strength and higher real rates, extending a theme that has increasingly become evident in the last couple years.

‘We are slightly worried about the risk of finding ourselves in an echo chamber and becoming too complacent with the bullish gold outlook,

‘More generally, we see downside risks for gold should US growth end up much stronger than we expect.

‘But for now, we find that the risk is probably more that we end up with rangebound rather than rising prices, as opposed to seeing a sharp, sustained selloff given the current macro environment.’