The price of gold soared to an all-time high of $5,100 this week, against a backdrop of escalating trade tensions and ongoing geopolitical instability.
The precious metal has seen its value more than double since August 2024, with analysts anticipating that it could reach as high as $6,000 by year-end.
Gold has long been viewed as a ‘safe haven’ against uncertainty, allowing investors to hedge against inflation, market volatility and currency fluctuation.
Laith Khalaf, head of investment analysis at AJ Bell, said: “Gold currently has the wind in its sails because of the unstable geopolitical environment, and President Trump’s repeated attacks on the Federal Reserve. Neither of those genies look like climbing back in their bottles any time soon.
“The huge amount of government debt issuance in developed economies also serves to commend gold as a safe haven, and certainly looking back over the last decade it has totally trounced other alternatives.”
With demand for gold intensifying, should investors take heed?
According to analysis by AJ Bell, £10,000 invested in gold 10 years ago would be worth £43,198 today, having risen 50% over the course of 2025. Factoring in inflation, the investment would still be worth £30,904.
In contrast, £10,000 invested in cash 10 years ago would now only be worth £8,325 after accounting for inflation, while the same amount invested in gilt funds would be worth £7,155 adjusted for inflation. Similarly, £10,000 invested in absolute return funds would be worth £9,582.
Khalaf said: “Many investors will no doubt now be turning to gold because it has performed so well, but some caution does need to be exercised. Investments that have done so well are often crowded trades and could be due a correction.
“While gold is often touted as the ultimate safe haven because it’s free from government interference, it is volatile and downdrafts can be painful for investors. Those with a cautious disposition and a low tolerance for losses should take note. Hence a typical balanced portfolio shouldn’t have more than 5% to 10% invested in gold, as a bit of catastrophe insurance alongside stocks and bonds.”
Tom Wilson, head of credit research at Isio, also advises caution: “The strength of gold’s rally reinforces the case for caution. Gold’s return profile can be volatile and unpredictable over shorter periods, and it does not always protect capital when inflation spikes or policy expectations shift.
“Following such a strong run, gold may also be more vulnerable to correction if key supportive factors, such as central bank purchases or easing financial conditions, begin to fade. While gold retains a role as a long-term diversifier and for investors looking for thematic exposure, we do not see it as a core allocation for portfolios seeking consistent downside protection or income-driven returns.”
For those considering whether gold should be added to their pension, Mike Ambery, retirement savings director at Standard Life, says it’s important to recognise that gold carries its own investment considerations.
Gold doesn’t generate any income so returns rely entirely on the price rising, meaning it can fall behind when markets are strong or interest rates are higher.
Ambery explains: “It can play a role for some people, particularly when markets feel uncertain, but it’s important to understand both the potential benefits and limitations before making any decisions. Unlike some other precious metals, gold isn’t widely used in industry, so it really is an asset whose value is based on its long history as a store of value.
“What really matters is how gold fits into your wider retirement plan. For most people, it’s about balance and moderation rather than making big changes based on recent performance. Thinking carefully about costs, risk, and long‑term goals is essential before adding any precious metals into your pension mix.
“For most savers, gold is best viewed as a supporting part of a wider pension strategy, rather than a core holding.”
Main image: lucas-kapla-94qPvR72FWk-unsplash
