Gold is one of the favourite trading instruments of the most successful traders at NordFX. This can be easily confirmed by looking at the monthly rankings published by this brokerage company. That is why it is appropriate to provide a special review, focusing solely on the XAU/USD pair.
Is Gold Truly a Protective Asset?
Since this article was first published, gold has undergone one of the most dramatic rallies in its modern history. From the $2,080 high recorded in May 2023, the price surged through $2,500 in 2024, crossed the $3,000 mark in early 2025, and reached an all-time high of $5,592 per troy ounce in January 2026. As of mid-2026, XAU/USD is trading around $4,000 following a sharp but characteristic correction. Market participants continue to turn to gold as a store of value — and the debate over whether it truly fulfils that role remains as relevant as ever.
According to a survey conducted by Bloomberg, approximately 50% of respondents identified gold as their primary safe-haven asset (with US Treasury bonds coming in second place, receiving only 15% of the votes). However, is gold truly an effective tool for hedging price risks, or is this a widespread misconception?
Consider, for instance, the period from March to October 2022 when gold prices fell from $2,070 to $1,616, a decline of almost 22%. This occurred despite the fact that inflation in the United States reached a 40-year peak during that time. So, what kind of protective asset is gold, then?
The Growth of Gold Prices
If we trace the dynamics of gold prices since the beginning of the 20th century, we observe the following pattern. In the year 1900, the price of this precious metal was approximately $20 per troy ounce.
During the period from 1914 to 1918, amidst and immediately after World War I, the price rose to around $35. Then, in the 1930s, during the Great Depression and as a result of currency reforms in the United States, the price was set at $20.67 per troy ounce. Throughout World War II, the value of the asset remained stable and was fixed at $35 under the Bretton Woods system, the same level as during World War I.
In 1971, the United States abandoned the gold standard, which led to floating exchange rates and an increase in the price of gold. In the late 1970s and early 1980s, the price exceeded the $800 mark per troy ounce due to geopolitical tensions, inflation, and a reduction in gold production. From the 1980s to the 2000s, the price of gold declined and fluctuated within a range of approximately $250 to $500.
Since the early 2000s, there has been a significant increase in the price of gold due to geopolitical events, financial instability, and inflationary pressures. In August 2020, amidst the COVID-19 pandemic and economic uncertainty, the price of gold surpassed the $2,000 mark per troy ounce for the first time. However, following this peak, it experienced a decline due to expectations of economic recovery, tightening monetary policies by central banks, rising interest rates, and various other factors.
A subsequent unsuccessful attempt to break above the $2,000 resistance level occurred in March 2022. The third surge took place in May 2023, when gold briefly touched $2,080.
What followed exceeded all prior expectations. In 2024, gold gained over 26%, decisively breaking above $2,500 for the first time. In 2025, the rally accelerated dramatically — XAU/USD surged 65% over the year, crossing the $3,000 milestone in early 2025. By January 2026, gold reached an unprecedented all-time high of $5,592 per troy ounce.
The key drivers of this historic move included record central bank gold purchases (approximately 800 tonnes per year), accelerating de-dollarisation by major economies, the beginning of the Federal Reserve's rate-cutting cycle in late 2024, and sustained geopolitical uncertainty. A correction of approximately 28% followed the January 2026 peak, bringing XAU/USD back to the $4,000 support level as of mid-2026.
Why Gold Prices Are Rising
So, what contributes to the value of gold and why does its price rise?
Factors Influencing Gold Prices
Let's delve into the factors that influence the price of gold. It's important to note that there is no direct correlation between the price of gold and each of these factors individually. Market forecasts and the combination of these factors also play a role in determining gold prices. For example, the recent surge in XAU/USD can be attributed to expectations of a reversal in the Federal Reserve's interest rate hike cycle, potential U.S. debt default, as well as geopolitical and economic instability due to Russia's armed actions in Ukraine. Now, let's explore the key factors:
Forecast: Will the Price of Gold Rise?
When it comes to gold forecasts, it is important to note that they represent assessments based on available data and analysis. The gold market is complex, influenced by multiple factors simultaneously, and no forecast should be treated as a guarantee. That said, the track record of major institutions on gold has improved as the structural bull case has become clearer.
The major banks and institutions currently hold the following views for 2026–2028:
Goldman Sachs has set a year-end 2026 target of $4,900, revised down from an earlier $5,400 forecast following a slowdown in ETF inflows. Morgan Stanley's base case sees gold near $4,800 by Q4 2026. UBS projects a peak of $5,900, while J.P. Morgan takes a more bullish stance — with a target of $6,300, citing what they describe as a "structural demand thesis" driven by sustained central bank accumulation.
Looking further out, J.P. Morgan expects gold to average $5,400 per ounce in Q4 2027. Bank of America has flagged a scenario in which gold could reach $8,000 by 2027 — a more extreme case tied to Federal Reserve policy uncertainty and historically low investor allocations to gold relative to other assets.
For 2028, the broad consensus base case sits in the $5,500–$7,000 range, assuming central banks continue diversifying reserves at a moderate pace while the dollar's share of global reserves gradually declines.
It is worth noting that all of the forecasts cited in the original version of this article — Goldman Sachs at $2,200, UBS at $2,100–$2,200, and the $2,400 target for 2027 — have already been surpassed, some by a wide margin. This serves as a reminder that in gold's case, the upside has consistently surprised to the upside.
To learn more about trading gold with NordFX, visit our Gold Trading Guide.
***
At the beginning of this overview, we raised the question of whether gold is a protective asset. In his early statements, Warren Buffett expressed scepticism about investing in gold, referring to it as an unproductive asset that doesn't generate income. However, looking at the chart, it becomes clear that he was mistaken. Even the legendary investor himself acknowledged this and later expressed a positive attitude towards gold as a store of value. Prominent financier George Soros also recognized gold as a diversification asset that provides protection against inflation and political instability. Ray Dalio, the founder of investment firm Bridgewater Associates, recommended including this precious metal in one's portfolio.
Most likely, they are all correct, and in the foreseeable future, gold will retain its role as a primary capital preserver. However, it is always important to remember that the effectiveness of any investment depends on the entry point. If the timing of a trade is chosen incorrectly, it is possible that your deposit may start to decrease. Nevertheless, in the case of gold, the probability of XAU/USD rising again is significantly higher than that of many fiat currencies. To withstand drawdowns and ultimately achieve profit, sound money management, as well as time and patience, are necessary.
NordFX Analytical Group
Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.
Go Back Go Back
