In the midst of penning this commentary, the world has gone mad.
Amidst the chaos, we thought we would take the opportunity to understand the importance of this bright, slightly orange-yellow metal, which created the city of my birth and is featured prominently on the daily Bloomberg economic broadcasts.
Brief History of Gold
Gold has been used as a medium of exchange since early civilisation. According to archaeological evidence, gold was initially used by the Egyptians around 2600 BC, who prized its beauty and scarcity. Gold became known as a symbol of prosperity and divine favour when the Egyptians used it to make jewellery and ceremonial items. Similar to this, gold was used as a means of exchange by other ancient societies, such as the Greeks. Standardised currency began when gold coins were produced in Lydia (present-day Turkey) in about the sixth century BC.
Gold’s utility as a store of value was further cemented when it became the basis of the gold standard around the 1870s in America. By directly linking currencies to a fixed quantity of gold, the gold standard guaranteed stability in global finance and trade. From the 20th century onwards, fiat currencies gradually supplanted this system and were implemented into the global economy.
Modern-Day Value of Gold
In the modern global economy, gold remains a vital asset, often regarded as a safe haven during times of economic uncertainty. The value of gold typically rises during periods of inflation, currency devaluation, or geopolitical instability. This is because investors rush to gold when they lose confidence in other financial instruments, such as stocks or bonds.
One of the key reasons gold has remained a store of value is its scarcity. Unlike fiat currencies, which can be printed by governments at will, gold is a finite resource. The total amount of gold in the world is limited, and its supply cannot be artificially increased. This scarcity gives gold its inherent value, as it cannot be replicated or inflated like paper money.
Additionally, gold is durable and does not corrode or decay over time, further enhancing its status as a long-term store of value. This makes it an ideal asset for the preservation of wealth over generations, unlike other commodities that may be subject to spoilage or degradation.
Gold is also highly liquid, meaning it can be easily bought or sold in global markets. This liquidity ensures that gold retains its value regardless of location or market conditions. During times of crisis, gold remains one of the most liquid assets available, allowing investors to convert it into cash when needed.
Gold as a Safe Haven in Times of Economic Turmoil
Gold’s most significant appeal lies in its status as a safe haven during times of economic instability. During periods of high inflation, currency devaluation, or geopolitical tensions, investors rush to invest in gold as a protective measure for their wealth. This is because gold tends to hold its value even when other assets, such as stocks or bonds, experience volatility.
For example, during the 2008 global financial crisis, when stock markets plummeted and many financial institutions faced collapse, gold prices surged. Investors sought refuge in gold, knowing that it was less susceptible to the risks that plummeted other asset classes. Gold’s price performance during the crisis reinforced its reputation as a reliable hedge against economic instability.
Similarly, post the COVID-19 pandemic, the value of gold rose as central banks worldwide implemented large monetary stimulus packages. These measures, aimed at mitigating the economic fallout, led to fears of inflation and currency devaluation, prompting further investment in gold.
Trump’s Tariffs and the Strengthening of Gold in 2025
In 2025, the impact of Donald Trump’s tariffs on the global economy is still being felt. So far this year, Trump has implemented a series of protectionist measures, including tariffs on Chinese imports, in an attempt to reduce the US trade deficit and promote American manufacturing. While the tariffs were designed to benefit the US economy, they triggered retaliatory measures from China and other trading partners, leading to a protracted trade war.
The tariffs have resulted in higher costs of goods, disrupted global supply chains, and created uncertainty in financial markets. As mentioned previously, in times of economic uncertainty, investors often seek to hedge their risks by turning to gold, which is considered a stable and reliable asset. As a result, the price of gold has risen steadily and has reached a new high of US$3,167.71 on the 2nd of April 2025.
Moreover, the ongoing trade tensions between the US and China, coupled with concerns over inflation and the potential for a global recession, have further contributed to the rising demand for gold. The combination of tariffs, geopolitical instability, and inflationary pressures has created an environment in which gold is increasingly seen as a safe-haven investment, hence its increase to new share price highs.
At this stage, it does not appear as if geopolitical stability is about to return, and hence, gold will continue to shine.