Gold prices have surged above $5,500 due to concerns about monetary policy, geopolitical tensions, and US political stability. Central bank buying has reshaped gold’s behavior during interest rate cycles, with profit-taking and dollar strength potentially triggering pullbacks. Despite this, the forces driving gold higher are expected to remain intact.

The New York spot gold price closed at $5,419 on Jan. 28, marking a 100% return over the last 12 months and a 19.5% return year-to-date. Central banks bought 297 tonnes of gold from January to November 2025, indicating a strong demand for the metal as a strategic diversification tool.

Geopolitical unrest, central bank buying, and a breakdown in the historical inverse relationship between gold and real interest rates have contributed to the current rally in gold prices. Despite higher real yields and fading Fed rate cut expectations, concerns about the US political environment continue to support gold’s upward trajectory.

As gold prices continue to climb, investors are questioning how much gold should feature in a well-diversified portfolio. European-domiciled gold ETFs have attracted over EUR 2 billion since the start of 2026, indicating a significant interest in the precious metal. Many fund managers suggest maintaining an allocation to gold as a resilient diversifier in uncertain market conditions.

Analysts recommend caution to investors considering buying gold at record highs. While the reasons for investing in gold remain valid, profit-taking could trigger price pullbacks. Waiting for a potential 10% price dip before initiating a dollar-cost averaging approach may be a prudent strategy for those looking to enter the gold market.

Read more at Morningstar: Gold Price Surges Above $5,500: Here’s Why