The price of gold has climbed to its highest level ever recorded in sterling terms, driven by a combination of global economic trends and UK-specific factors.
Over the past 12 months, gold has appreciated by £647.63 rising from a January 2024 low of £1,580.63 to today’s £2,228.26 per troy ounce.
While the global economic landscape has played a pivotal role, domestic economic issues and political uncertainty have been instrumental in pushing gold to its all-time high against the pound.
Solomon Global the specialist supplier of LBMA-approved gold and silver bars and coins, looks at some of the contributors to this latest high.
Internationally, the gold price has advanced due to economic uncertainties, ongoing geopolitical tensions, fears about economic slowdowns and sustained inflationary pressures (it is anticipated that global inflation will remain high until at least 2028, according to a recent survey by the German ifo Institute and Swiss Economic Policy Institute). Investors continue to turn to gold as a ‘safe-haven’ asset amidst these issues. Additionally, central banks worldwide increasing their gold reserves has further pushed up prices and underpins global demand.In the UK, the all-time high for gold in GBP can be attributed to several key factors.
Sterling weakness
The pound has faced headwinds due to persistent inflation, concerns over the UK’s economic outlook and Trump’s incoming tariffs. When sterling weakens against the US dollar, the relative purchasing power of GBP diminishes. Since gold is priced internationally in US dollars, a depreciating pound increases the cost of gold in GBP terms.
Inflation and interest rates
A recent surprise fall in UK inflation has tempered immediate concerns but long-term inflation expectations remain elevated. Gold continues to be a popular choice for investors seeking to hedge against sustained price pressures. Conversely, softer inflation figures offer a path for the BoE to reduce interest rates. As a non-yielding asset, gold becomes more attractive when interest rates fall.
Economic uncertainty
The UK economy continues to grapple with sluggish growth prospects. External challenges, such as potential shifts in global trade dynamics, and internal fiscal pressures following the autumn budget, have left investors wary about the future. Despite the slight decrease in inflation, structural issues persist. UK investors remain cautious and continue to be attracted toward gold to preserve wealth.
Strong retail demand
Gold’s reputation as a ‘store of value’ has led to robust demand among UK retail investors, particularly as other traditional savings options offer limited returns amidst rising living costs.
“Gold’s record-breaking performance in GBP reflects local and global economic conditions,” said Paul Williams, managing director at Solomon Global.
“Gold shone on the global stage throughout 2024, and the factors that led to its stellar performance don’t look to be abating in 2025. As the UK navigates economic challenges, many are turning to the asset as a stable and reliable investment. This trend underscores gold’s enduring appeal as a hedge against uncertainty and a means to safeguard wealth.”
