Spurred by increasingly-erratic U.S. trade and foreign policy, the price of gold has soared over the past year — a geopolitical turn that may have fundamentally shifted investor behaviour.
In a report released Wednesday, economists at Desjardins Group examine the rise in gold prices, which briefly topped the US$5,500 per ounce mark earlier this year before falling back to around US$5,000, which is still almost double where prices stood at the start of 2025.
The report points to two main reasons for the surge in gold prices: “massive purchases by central banks and the economic and political climate in the U.S.”
And those reasons are closely related, as the surge in central bank demand is being driven largely by geopolitics too.
“The catalyst for this shift in central bank dynamics was the war in Ukraine, which revealed two major findings for the global economy,” the report said. “First, a large‑scale conflict in Europe can still happen. Second, the United States demonstrated the scope and power of the dollar as a political and economic weapon, excluding Russia from the global financial system.”
As a result, the central banks in countries “that fear conflict or potential U.S. sanctions” — such as China — have built up their gold reserves the most over the past couple of years, the report said.
And, when geopolitical tensions rise, “such as those related to reciprocal tariffs, Iran, Venezuela, or even Greenland, we see sharp, temporary spikes [in gold prices],” the report noted.
Against this backdrop, the supports for rising gold prices seem likely to remain, at least in the short term.
For one, demand from central banks “is expected to continue,” the report said.
At the same time, “investors are rethinking their portfolios amid financial market volatility, the Trump administration’s unpredictability with respect to trade policy, domestic policy and military intervention, and the reshaping of the global order and supply chains,” it said.
If the old world order is dead — as Prime Minister Mark Carney suggested in his recent speech in Davos — and it’s not coming back, “the U.S. administration’s actions would have triggered a sustained shift in investor behaviour, as they seek better protection against these risks,” the report said.
The U.S. dollar’s traditional role as a safe‑haven asset has weakened too, leaving gold “as one of the last reliable assets,” it noted.
For now, it’s not clear whether the damage to the global order can be undone, and in the meantime, the prospect of further episodes of geopolitical stress — arising from events such as “armed conflict, a new round of tariffs, and the U.S. mid‑term elections” — will likely underpin gold prices in the months ahead.
Alongside these fundamental supports, the recent volatility in gold prices has also attracted speculative investors, which pose upside and downside risks to the outlook too. While speculative investing has amplified recent gains, it also increases the risk of a large correction, the report said.
So, while Desjardins is currently forecasting that gold will finish the year at around US$5,200 per ounce, it stresses that there’s “significant uncertainty around this forecast.”
Longer term, it expects that the run-up in gold prices will eventually slow, or reverse, particularly as gold production ramps up.