If there were any doubts over gold’s status as a safe haven they have been blasted away as the precious metal makes a push towards the $3,000 mark for the first time amid volatility elsewhere in the financial markets.

Gold’s status as a safe haven asset is based on its historic role as a store of value and the fact that, unlike currencies, its value cannot be manipulated through adjustments to interest rates. Plus, it is actually hard to find and costly to mine so its supply grows slowly, unlike the supply of money.

Since the price bottomed out during the pandemic, gold has nearly doubled in value. As of 10 February, it had outperformed even the high-flying S&P 500 index in the US on a five-year view. This perhaps comes as less of a surprise when we consider the events we have seen over the last half decade.

It is a heady list which includes: an escalation in conflicts in the Middle East and Ukraine; the after-effects of the global pandemic; political uncertainty at home and across the Atlantic; and a period of significant inflationary pressure. Now we have the prospect of a global trade war as the Trump administration mulls a range of tariffs.

Another driver for gold, which has been bubbling away in the background, is buying by global central banks looking to diversify their reserves out of dollars.

This trend has been particularly evident in countries like Russia and China which have a difficult relationship with America. The shift to a round of interest rate cutting, even if it has not been aggressive as initially expected, is also helpful for gold. Because you receive no income from holding gold its attractions stack up better when rates are falling.

The dollar is actually one of the few factors not in gold’s favour right now. Because it is denominated in dollars, the US currency’s recent strength has been a headwind. However, there have been signs of this strength evaporating, with the US Dollar Index modestly lower over the last month. This could reflect a big fiscal deficit in the US and the risk of this getting larger.

Investors can gain exposure to gold through exchange-traded commodity vehicles which track the price and are backed by actual bullion in a vault. Alternatively gold miners offer indirect exposure and, as the relative performance of the iShares Gold Producers (SPGP) exchange-traded fund demonstrates, they have lagged the move higher in gold since 2020.

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