What moves the price of gold

Where demand comes from

The World Gold Council tracks who buys gold each year. In 2025, total demand topped 5,000 metric tons for the first time, worth a record $555 billion:

Source of demand	2025	What drives it
Jewelry	1,542 tons (down 18%)	Incomes and prices, especially in India and China
Bars and coins	1,374 tons (a 12-year high)	Individual investors
Central banks	863 tons	Reserve policy and geopolitics
Gold ETFs	801 tons added	Investment flows, often from institutions
Technology	323 tons	Electronics and other industrial uses

On the supply side, mines produced a record 3,672 tons in 2025 and recycling added about 1,404 tons. Compare that with the roughly 222,600 tons of gold above ground, worth about $29 trillion at mid-2026 prices, and it’s clear why the price depends far more on whether holders want to buy or sell than on how much is mined.

Interest rates

Gold pays no interest, so higher rates, especially rates after inflation, make holding it more costly, and lower rates make it cheaper. For about two decades that was the most reliable driver of the gold price. It has mattered less since 2022, when central bank buying took over. Our guide to interest rates and gold has the details.

The U.S. dollar

Gold is priced in dollars worldwide. When the dollar weakens, gold gets cheaper for buyers using other currencies and its dollar price tends to rise. In January 2026, a dollar at a four-year low was one of the reasons Reuters gave for gold’s run toward $5,600.

Central bank buying

Central banks hold about 39,000 tons of gold as part of their reserves. They were net sellers for much of the 1990s and 2000s, when European central banks agreed to limit their sales under the Washington Agreement. Since 2022 they’ve been heavy buyers, partly to reduce reliance on the dollar after Western countries froze Russia’s reserves. They bought 863 tons in 2025, and 289 tons in the second quarter of 2026 alone, 62% more than a year earlier.

Investment flows

Money moving into and out of gold ETFs and bars and coins can swing prices quickly. Gold ETFs added 801 tons in 2025, their second-strongest year on record, and strong ETF inflows were part of the January 2026 surge. In the second quarter of 2026, gold ETFs saw 45 tons of outflows.

Fear and world events

Gold tends to attract buyers when people are worried: about wars, financial crises, inflation or government debt. U.S.-Iran tensions were among the reasons Reuters gave for the January 2026 rally, for example. This effect is real but unpredictable. Headlines that seem certain to move gold sometimes barely do, and a rally built on fear can reverse when the fear fades.

Big political events work the same way. Elections, referendums and trade disputes can move gold for days or weeks, mostly through their effect on the dollar, interest rates and nervousness. Forecasts that a particular election or vote will send gold soaring have a mixed record at best.

Jewelry demand

Jewelry is the largest single use of gold, and it’s sensitive to price. When gold gets expensive, buyers in India and China, the biggest markets, buy fewer tons. Jewelry volume fell 18% in 2025, and second-quarter 2026 jewelry demand of 278 tons was the lowest since the pandemic. High prices tend to cool this source of demand, which acts as a mild brake on rallies.

Mine supply and recycling

Mine output changes slowly, since new mines take many years to develop. Recycling responds faster: when prices are high, more old jewelry gets sold and melted. Neither usually moves the price much in the short run, but both limit how far prices can run over longer periods.

How to use this

These forces overlap and often pull in different directions, which is why gold forecasts are so often wrong. For most people, the practical lesson is to decide how much gold belongs in your savings for the long term, rather than trying to trade the headlines. Is gold a safe investment? and the spot price of gold are good next reads.

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