In late January, the gold price reached an all-time peak of around US$5,500 (£4,025). January 30 saw one of the largest one-day falls in prices, which sank by nearly 10% after hitting a record high only the day before.

This was a dramatic about-turn, from a bullish gold market that rose by more than 300% in the last decade, over 150% in the last five years and (perhaps more pertinently) by 75% since US president Donald Trump’s “liberation day” tariffs announcement. To make sense of it, we need to understand some of the factors that led to the rise.

The reasons broadly break down into two categories. The first concerns market uncertainty and gold in its “safe haven” role. As a financial asset, gold offers no income, unlike shares (which might provide dividends) or bonds (which offer coupon payments). So during good times, gold is eschewed for the former and during periods of high interest rates for the latter.

However, during periods of heightened risk and uncertainty, the tangibility of gold gives it value. This was seen during the financial (and subsequent sovereign debt) crisis and at the beginning of the COVID period. Here both share prices and interest rates were low (interest rates historically so) and gold became the favoured asset because it offered the chance of greater returns relative to risk.

These crisis periods can often be........

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