Gold Prices Surge 5% Amid Middle East Tensions

Gold prices are surging, nearing their all-time high of $3,433, as geopolitical tensions in the Middle East escalate. This rally is part of a broader trend in 2025, where gold has become a favored safe-haven asset amidst increasing global uncertainty.

The recent spike in gold prices is driven by the escalating conflict in the Middle East, particularly following Israel’s military strike on Iran’s nuclear sites. This has heightened fears of a broader regional conflict, prompting investors to seek refuge in traditional safe-haven assets like gold. The Dow Jones Industrial Average fell 679.83 points, and the S&P 500 dropped 1.13%, while oil prices soared by 7% in a single day, the largest intraday move since the early days of the Ukraine war. Despite an initial tumble, Bitcoin recovered to $105,000, showing relative stability.

Higher oil prices are expected to drive up costs for gasoline and diesel, adding to inflationary pressures that are already a concern for central banks and consumers alike. This enhances gold’s appeal as a hedge against inflation and economic instability. The spot gold price has climbed nearly 5% over the past month, rebounding from a mid-May low of around $3,123 and gaining 1.6% overnight, pushing it above $3,400 and close to its April all-time high of $3,500. For the year so far, gold is up more than 30%, making it one of the best-performing asset classes in 2025.

Gold’s rise to become the world’s second-largest reserve asset in 2024, surpassing the euro, is a significant development in global finance. The U.S. dollar remains dominant with a 46% share of global reserves, followed by gold at 20% and the euro at 16%. This shift reflects a long-term trend of central banks diversifying their reserves away from traditional currencies in response to geopolitical risks and concerns over the weaponization of the dollar. Central banks have been net buyers of gold for three consecutive years, with annual purchases exceeding 1,000 tonnes, double the pace of the previous decade. Demand is expected to continue, stoking the bullish case for gold.

Gold’s performance in 2025 reinforces its appeal as a safe-haven asset, with prices close to all-time highs and its new status as the world’s second-largest reserve asset. Meanwhile, while Bitcoin continues to hold steady, the world’s number-one crypto has yet to displace gold as the ultimate hedge in turbulent times.