Gold Up 49%. Learn Why And Whether To Buy $GLD

Why Gold Has Risen So Much

Gold tends to rise in times of trouble. This year’s rise has outpaced rallies during the pandemic and the 2008 financial crisis. Gold has not risen this much since the 1979 inflationary shock, according to the Journal. that prompted the Federal Reserve to send short-term interest up to near 20%.

During that period of inflationary shock, gold outperformed stocks significantly – due to the combination of slow growth and inflation – known as stagflation.

Gold’s strongest period of outpeformance compared to stocks happened in the stagflationary years between 1971 and 1980 – when gold outperformed stocks by 2,325%, I wrote in April.

Gold’s rise reflects high anxiety flowing from economic policies such as tariffs not seen since the 1930s and efforts to undermine the independence of the Fed and the providers of government economic statistics on which interest rate policies are set.

Such policies are undermining confidence in the dollar as the world’s reserve currency. The fear of an unstable, declining dollar is driving central banks in parts of the world that are politically at odds with the U.S. to replace dollars with gold.

For example, central banks bought 415 tons of gold in the first half, according to the World Gold Council, and analysts expect continued central-bank purchases in 2026 to support prices, noted the Journal.

Western investors have are pouring billions into U.S. exchange-traded funds linked to physical gold. In September, $33 billion poured into such funds – marking the biggest monthly inflows on record, according to Morningstar Direct data featured by the Journal.

Why Gold Could Keep Rising

Since the 1860s, gold rallies have been followed by long periods of decline, noted the Journal.

Of all the reasons gold could keep rising – its tendency to increase in price during inflationary times, a hunger for portfolio diversification, its tangibility, and its relative liquidity, none is more important than the world’s need for a safe-haven asset during times of economic uncertainty and geopolitical tensions.

With Russia, China and other countries already under leadership with a dictatorial bent, the current U.S. administration’s actions seem to be contributing more to the uncertainty and geopolitical tension that flow from the concentration of power in such hands.

Why Gold Prices Could Drop

However, it is possible to imagine a future in which a shift in leadership sends the price of gold back down. Should new leadership drive economic growth, rising interest rates that lower inflation, and a stronger U.S. dollar, demand for gold could drop. Such a drop could induce investors to take profits on their gold bets as they seek higher return assets elsewhere.

What To Do About Gold

It seems more likely such leadership is far from imminent. As a result, central banks are likely to add to their holdings and investors are likely to keep pouring money into gold. Indeed, gold prices, which gained 27% in 2024, “are likely to hit $4,900 a troy ounce by December 2026,” analysts at Goldman Sachs forecast according to the Journal.

In April, it was unclear whether the Fed would raise interest rates to tamp down inflation or keep them where they are now – or lower them – to keep unemployment from rising more.

That debate seems more resolved now. By mid-2026, the Fed is likely to cut benchmark U.S. interest rates by a full percentage point and ETF holdings in the West are also likely to rise, according to a note published late Monday by Goldman Sachs analysts Lina Thomas and Daan Struyven.

If you agree with their conclusion, one way to profit may be to buy the SPDR Gold Trust $GLD.