The price of a troy ounce of gold set 53 new records in 2025, increasing by 65% to $4,308 over the year. By the end of January 2026, it had exceeded $5,500 during intraday trading before abruptly falling back within a couple of days.
Over the last few years, market participants, including investors and analysts, have been changing their forecasts increasingly frequently, trying to estimate the gold price in a few months and when it will reach its ceiling. What factors influence the price? Let us look into the key factors shaping the price of the metal.
Fundamental factors: demand
For a long time, the fundamental factor of the supply and demand balance, habitually used by analysts to examine other segments of the metallurgical industry (e.g., base and ferrous metals), had a relatively indirect impact on gold price formation. However, starting from 2022, demand has begun to play an increasingly important role.
This is due to geopolitical tensions. These have caused a sharp increase in demand for gold from central banks (link in Russian), which now buy it to diversify their foreign currency reserves. In 2022 alone, according to data from the World Gold Council, global central banks purchased 1,080 tonnes of gold, which approximately doubled the average annual purchases over the previous decade. In 2023 and 2024, central bank gold purchases also exceeded 1,000 tonnes, and in 2025, they equalled 863 tonnes, remaining at historically high levels.
Overall, in 2025, total gold demand was up by 1% and reached a record of 5,002 tonnes.
- Central banks
Purchases of gold by global central banks have become one of the most important drivers of the price of gold in recent years. In 2022, according to data from the World Gold Council, central banks accounted for about a quarter (22.6%) of total demand, compared to 9.5% in the previous year. In 2023–2025, purchases of gold by central banks remained at historic highs on the back of persistent geopolitical tensions in various regions of the world and attempts by several countries of the global south to cut the excessive share of the US dollar in their own international reserves (gold and foreign exchange reserves).
In the middle of 2025, about 95% of respondents to the Central Bank Survey believed that the share of gold in the international reserves of global central banks would increase over the next 12 months. Ongoing geopolitical risks and the relatively low share of gold in the international reserves of several large countries suggest that central banks will continue to purchase increased volumes of gold. For example, the share is 8.6% in China, 8.7% in Japan, 6.8% in Brazil, and 6.3% in Singapore. All of these are below the average global level: in late 2025, the share of gold in global central bank reserves reached 26.7%. If the Big Four (the US, Germany, France, and Italy), in whose international reserves gold accounts for about 80%, are excluded from the calculation, the global average figure declines to 10–12%.
The average proportion of gold in the ECB’s international reserves is 54%, while the national banks of several countries lag significantly behind (e.g., 5.7% in the Czech Republic and 7.2% in Denmark). In 2025, the global leader in central bank gold purchases was the National Bank of Poland, which bought 102 tonnes, increasing the share of gold in its international reserves to 28%, with the target set at 30%. The Czech Republic bought 20 tonnes, increasing its gold reserves to 72 tonnes, with the target set at 100 tonnes, which is expected to be reached by 2028.
In 2025, besides Poland, the largest gold buyers were Kazakhstan (57 tonnes), Brazil (43 tonnes), Azerbaijan (38 tonnes in Q1–Q3), Turkey (27 tonnes), and China (27 tonnes; see also the Box). The Reserve Bank of India, which bought 73 tonnes in 2024 and ranked as one of the top gold purchasers, added only four tonnes to its reserves last year.
Moreover, it is important to remember that central banks as a rule operate in line with their own mandates and therefore, unlike other consumers, are less sensitive to the price of gold. In all probability, this means that they will continue buying gold even if others stop.
- Jewellery demand
For a long period of time, jewellery demand constituted the lion’s share of aggregate gold demand: it averaged 50% in 2010–2022, exceeding 60% in certain years. However, this share has declined totalling only 33% in late 2025 amid sharp price increases.
Consumers in Asia and the Middle East, which are traditionally active jewellery-buying regions, are unable to increase their spending at the same pace as prices are rising. At the end of 2025, year-on-year jewellery demand for gold fell by 24% in both India and China and by 11% in the Middle East, with several countries registering steeper drops, such as 20% in Turkey, 18% in Egypt, and 15% in the UAE and Kuwait.
India and China accounted for around 60% of total jewellery demand in 2025. Although the downward trend of declining purchasing power amid a sharp increase in gold prices affected both countries, their markets responded differently.
In India, the reduction of the gold import duty from 15% to 6% in 2024 to counter smuggling supported the legal market. However, in 2025, the price factor outweighed the duty reduction effect. Despite economic growth (GDP gained 6.5% in the fiscal year from April 2024 to March 2025, and it is forecast to grow by 7.4% in 2025/2026 and by 6.8%–7.2% in 2026/2027), the surge of the local gold price (by 74% for the year) and the weakening of the rupee (by approximately 5% against the US dollar since April 2025) caused a 24% drop in jewellery demand, which fell to 430.5 tonnes. Consumers reduced purchase volumes and shifted demand towards lower-carat items or alternative precious metals. This trend was primarily characteristic of younger generations. The market was partially supported by traditional wedding purchases during the Diwali festival in mid-autumn. As estimated by Indian jewellers and gold coin dealers, demand in the days preceding the festival may soar by 20–30%. Trade-in also provided support: over 40% of the sales of several jewellery chains involved the exchange of old jewellery for new items with additional payments.
In Greater China (according to the World Gold Council, this includes mainland China, Hong Kong, and Taiwan), jewellery demand also fell by 24% in 2025, to 386 tonnes. The downward pressure was driven by higher gold prices, Chinese households’ conservative spending patterns amid economic uncertainty and geopolitical risks, as well as the VAT reform on gold, which reduced tax deductions for gold jewellery fabrication starting from November 2025. Demand became polarised: younger consumers opted for ‘lightweight’ lower-carat jewellery, while well-to-do consumers chose rare and expensive items. Trade-in programmes were also actively used to mitigate the price shock. Geopolitics, high prices, and moderate economic growth will limit demand in 2026, while lower interest rates and fiscal support for the population may partially stabilise it.
- Investment demand
Investment demand includes gold purchases – primarily gold bars, coins and gold exchange-traded funds (ETFs) – by commercial banks, investment funds, management companies, family offices, individuals, etc., i.e., all entities excluding central banks. As of the end of 2025, investment demand accounted for 43.5% of the total demand for gold, reaching 2,175 tonnes. This was an all-time record, surpassing even the figure of the 2020 pandemic year of 1,800 tonnes (38% of total demand that year). Year-on-year demand growth was 84%.
Investors responded actively to the price increases, trying to buy during the dips. Demand remained high during the year among all categories of investors, including both private and institutional investors. Demand was supported by a flight to ‘safe’ assets and the diversification of investment portfolios driven by geopolitical risks, a weak dollar, and expectations of rate cuts.
Demand for bars and coins reached 1,374 tonnes in 2025, a record since 2013, gaining 16% compared to 2024. India and China accounted for three-quarters of the increase and 53% of the total demand for physical metal. The main factor supporting demand was the rising price; investors believed it would continue to go up, thereby fuelling the gold price rally.
ETFs accounted for the biggest share of the increase in investment demand last year – 801.2 tonnes. In contrast, in 2024, ETFs posted an outflow of about three tonnes. The total volume of physical gold held in gold ETFs hit a record of 4,025 tonnes. In monetary terms, inflows into ETFs totalled $89 billion, while the amount of gold assets managed by ETFs reached $559 billion.
As with bars and coins, the key driver of inflows into ETFs was the rising gold price, which attracted investors, while inflows into funds, in turn, supported a further rise in the metal’s price. After decreasing for several years (from 2021 to 2024, gold held in ETFs declined), this demand category reversed dramatically and boosted the gold price. Inflows into ETFs were observed in virtually all regions.
Despite the record high levels of inflows into ETFs in 2025, market participants (including the World Gold Council) assess the prospects of this segment positively, noting the same geopolitical factors, emerging issues regarding the prospects of US Fed’s independence, and the trajectory of interest rates. Moreover, investors will always look for methods of portfolio diversification during periods of inflated stock market prices, and gold in various forms (including ETFs) can serve this purpose very well.
- Industrial demand
The technological sector remains one of the most stable demand channels. In 2025, industrial companies bought about 323 tonnes of gold (a 1% decline YoY). A key factor driving the sector’s development throughout the year was the artificial intelligence (AI) boom, which supported demand for electronics, as the need to facilitate high-speed computing increased the use of gold connecting wires, contact materials, and interconnections.
At the same time, the AI boom redirected production capacities to meet demand in this sector. This led to a reduction in the production of certain ‘traditional’ components and, consequently, to high prices, which added volatility to the market for household electronic appliances.
Fundamental factors: supply
According to the calculation methodology of the World Gold Council, similarly to total demand, global gold production increased by 1% to a record high of 5,002 tonnes. This includes both primary production by gold mining companies and secondary gold production from scrap.
Based on projections from the sectoral analytical agency Metal Focus, mined gold production is likely to gradually plateau over the next five years. On the one hand, there are positive factors, such as the launch of new projects and their ramp-ups. On the other hand, these factors are balanced by limitations on the upside potential of gold production, such as declining reserves at existing mines, possible suspensions of production, and rising production costs.
Overall, however, global gold production is rather stable, with an average annual change of approximately 2% in 2001–2024. The reasons for this stability are, first, the geographical diversification of production, which helps smooth out potential disruptions, and, second, the length of the process of bringing a new mine into production (the difficulty of discovering new deposits and obtaining licences, as well as the lengthy construction period).
According to the data of the US Geological Survey (USGS), global gold production is highly concentrated. In 2024, the top five and top 10 gold producing countries accounted for 41% and 59% of global output, respectively.
Russia is consistently among the top three. Since 2022, official statistics have not disclosed the absolute volume of gold production, though the figure may be as high as 345 tonnes according to estimates by Technologies of Trust (link in Russian).
- Primary gold production
Primary gold production accounted for 72% of total output in 2025 (3,672 tonnes, +1% YoY). The world’s top 20 producing companies account for 36% of total global primary gold production, while the top five companies account for 18% (data for 2024).
Metals Focus forecasts a slight increase in output in 2026 amid growth in artisan and small-scale gold mining due to high metal prices. However, over a five-year horizon, as mentioned above, mined gold production is likely to plateau.
- Secondary gold production (recycling)
Secondary gold production (from scrap) accounted for 28% of global output in 2025 (1,404 tonnes). The volume of recycling is highly dependent on price levels, although it gained only 2% despite two-digit price growth. This discrepancy is explained by the fact that gold scrap supply, which primarily depends on the sale of old jewellery by households in advanced economies (the US, the EU, and Japan), grew steadily over the year, in contrast to developing counties (the Middle East and Southeast Asia). Among the latter, a YoY increase in secondary production was recorded only in China.
- In Europe, the decline in economic activity played a key role in the growth of gold scrap supplies.
- In Japan, a weaker yen drove a significant increase in the gold price in the national currency and spurred sales of old jewellery by households.
- In the US, owners of old gold jewellery also used higher metal prices to justify sales.
- China has become the engine of gold recycling growth in East Asia notwithstanding somewhat mixed economic indicators (the 5% GDP growth target for 2025 was met, but domestic consumption and real estate investment dropped and lagged behind export industries) and the tax reform, which led to higher spreads and, consequently, discouraged households from selling old gold jewellery as scrap.
- Recycling in South Asia decreased compared with 2024 chiefly on account of India. Looking for better terms, consumers actively sold old jewellery in exchange for new items, receiving discounts, and they also used gold and jewellery as collateral for loans, which reduced the volume of gold used as scrap.
The World Gold Council expects that high prices will continue to support gold recycling volumes. However, as evidenced by the results of 2025, recycling growth may be more subdued than market participants anticipate based on price levels. At the same time, a significant slowdown in economic growth in some major world regions may force consumers to sell their gold jewellery to meet their own financial needs.
Factor of gold production cost
Another fundamental factor influencing gold prices is cost inflation for gold miners. Their all-in sustaining cost (AISC) remained at the level of $800–900 per troy ounce for a long time. Since early 2020, due to global inflation, the average AISC of the industry has grown by almost 60%, from $1,000 per troy ounce in 2020 Q1 to about $1,600 per troy ounce in 2025 Q3.
Why are costs rising? Broadly speaking, the increase in AISC can be explained by the inflation faced by industrial companies (and also all others) since 2020. Let us examine the situation in more detail and understand the key factors driving gold miners’ costs.
- Difficulties in finding new deposits
Gold mining companies are facing increasing difficulties in finding new deposits, as the majority of the most accessible and high-quality (in terms of gold content) deposits have already been developed. They are either being mined at the moment or are at various stages of preparation for the launch of production. Between 2020 and 2024, only six deposits with total reserves of just 27 million ounces were discovered, which was the smallest volume since 1990. For comparison, 186 deposits totalling 1.72 billion ounces were discovered in 1990–1999, 119 deposits totalling 0.9 billion ounces were discovered in 2000–2009, and 42 deposits totalling 0.3 billion ounces were discovered in 2010–2019.
Not a single deposit discovered in the last 10 years has been among the top 30 largest discoveries since 1990. Among the deposits discovered in 2020–2024, the average reserve size was only 4.4 million ounces compared with 7.7 million ounces in 2010–2019.
- Focus on existing assets
Excluding previously recorded assets, between 2020 and 2024, gold mining companies published 213 reports on the results of exploration for 137 million ounces of gold. Only 44% of these reports referred to development projects, i.e., new assets. More than half of these reports were about the follow-up exploration of existing assets. Thus, the overwhelming share of exploration budgets is spent on existing assets and not on finding new ones.
Gold miners’ exploration expenditures are growing, with the average annual exploration budget increasing by over 100% from $3.3 billion to $7 billion in 2016–2022, with an all-time high of $9.7 billion reached in 2021. Companies’ exploration expenses were $6 billion or 15% less, than a year earlier. In 2024 they amounted to $5.6 billion (–7% YoY).
- Declining gold grades
Industry analysts note a decline in the average grade of gold at currently operating deposits. Typically, the most efficient, high-grade and low-cost deposits are developed first. According to Metal Focus, over the past 15 years, the average grade across all global assets has decreased by 16% from 1.01 grams to 0.85 grams per tonne. Average grades are expected to remain close to 0.85 grams per tonne in 2026. However, considering that over half of global output comes from open-pit mining, which is characterised by lower gold grades compared with underground mining, the downward trend in gold grade, though periodically offset by the commissioning of new deposits, will continue in the long term.
- Inorganic reserve growth
Due to the increasing complexity and cost of organic reserve replacement through the additional exploration of existing deposits, gold mining companies are resorting to inorganic methods, namely the acquisition of competitors at various stages of the operating cycle. Comparing to finding a new deposit and developing from scratch, this method may often be more efficient in the long term.
According to S&P Global Market Intelligence statistics, in 2024, 45 gold deals (45 transactions) worth $19.3 billion dominated the-mining market in terms of volume and number. Australia and Canada were key locations. Assets with total reserves of 192.5 million ounces changed owners as a result of these deals. The estimated transaction volume for 2025 is $25 billion, with the share made up by the top five deals increasing to 58% of the total compared to 52% in 2024.
The Federal Reserve factor
Due to the fact that gold is essentially an investment commodity rather than an industrial one, for a long time, changes in the Fed’s rate and, more broadly, changes in real interest rates in the US, have been one of the main (if not the most important) factors influencing gold prices.
According to the general rule, lower interest rates create more favourable market conditions for an instrument like gold. In its basic form (bars or coins), gold does not generate intermediate income and, therefore, generally does not serve as a means of earning money but as a means of protecting capital in periods of instability and rising inflation. Real interest rates (nominal rates minus inflation) often go down precisely during periods of unexpected inflation acceleration if central banks raise nominal rates too slowly. Compared to instruments generating additional income (coupons, dividends, etc.), the opportunity cost of holding gold falls during periods of low interest rates. This means that an investor loses nothing by abandoning income-yielding instruments, as income is ‘eaten away’ by inflation, whereas gold protects capital from depreciation.
However, around mid-2022, the Fed’s interest rate ceased to determine gold’s behaviour. There was a sort of ‘decoupling’ of gold from interest rates, as other factors moved to the foreground: first, demand from global central banks, and then, investment interest. Nonetheless, the Fed’s rate-related measures remain a significant ‘verbal’ factor that shapes the sentiment of market participants, who closely monitor the path and speed of rate movements.
It appears that more than mere rate decisions have an influence. The gold price’s reversal in early 2026 from its January peak was probably caused not only by profit-taking by market participants but also by Wall Street’s unfulfilled expectations regarding the new nominee for Fed Chair. On 30 January 2026, US President Donald Trump nominated Kevin Warsh, who is considered a proponent of strict fiscal discipline and the reduction of the Fed’s balance sheet. This could mean, first, that if the Fed Chair is replaced, monetary conditions will tighten, even if nominal rates are cut. Second, the risk that the Fed will lose its independence, which had been priced into gold by traders, has significantly decreased, considering the relative ‘margin of safety’ of Warsh, who was previously on the Fed’s top board.
Thus, gold prices are under the impact of numerous factors, from fundamental factors (supply and demand balance, cost levels, declining gold grades, and the need to replenish reserves) to macroeconomic (interest rates) and political ones. Very often, purely speculative drivers are added to the above factors, such as the gold rally in January 2026. It is certainly possible to single out the most important factors in any given period, however, investors, analysts, and all those interested in the gold market should monitor all factors as closely as possible whenever possible to effectively use price movements and avoid being taken advantage of by speculators.
