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Does today's increase in the price of gold have anything in common with that of 1980?
Analysts and economists are trying to answer this question by analyzing the factors that currently favor the precious metal compared to those that prevailed in 1980.
With tensions high between the historic allies over U.S. tariffs and wars in Ukraine and the Middle East, the major powers seem unlikely to work together this time to resolve the issues that are reviving interest in gold as an investment haven, analysts say.
"The rise of the precious metal above $3,000 per ounce, recently driven by tariffs announced by US President Donald Trump, has meant that for the first time geopolitical and economic uncertainty has acted as a lever for price increases in the gold market," said HSBC analyst James Steel.
Gold is up 16% so far this year, following a 27% gain in 2024. While the market trajectory won’t be linear, analysts say gold’s entry into an uptrend looks more sustainable than it did 45 years ago. Since the precious metal is inversely correlated with trade flows, analysts say Trump’s stance on tariffs has pushed new investors into gold, due to concerns about a full-blown trade war.
The dollar is also traditionally considered a safe haven, but there are some signs of erosion of this investment perception as uncertainty around tariffs intensifies.
Trump has upended the global order, showing that the US can no longer guarantee Europe's security, as Washington has done since World War II, radically changing the American approach to the war in Ukraine. There has also been concern about the possible annexation of Greenland by the US.
“45 years ago, the factors that had driven gold to very high levels were the Iranian revolution and the oil crisis, but they corrected relatively quickly, driving gold down,” said HSBC’s Steel.
Trade tensions are the latest in a series of factors that have led to the rise in gold prices. The world went through a two-year pandemic, then came Russia's war with Ukraine in 2022, the crisis in the Chinese real estate market and Israel's war in Gaza.
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