January 27, 2026 | 08:47 pm
TEMPO.CO, Jakarta - Why gold price increase is a question dominating global financial discussions as 2026 begins, with gold trading near record highs and attracting strong investor interest worldwide.
After years of steady gains, gold continues to reinforce its reputation as a safe haven and a store of value, especially amid rising geopolitical tensions, trade uncertainties, and instability across global bond and currency markets.
If you're looking to invest, here are some of the key reasons behind the rising price of gold, as cited from Gold Republic, Investopedia, Bankrate and other various sources.
Why Does Gold Price Increase?
1. Central Bank Reserves
One of the most common key reasons why gold prices continue to soar is the steady expansion of central bank gold reserves worldwide. Major economies such as China and India are actively increasing their gold holdings as part of a broader strategy to diversify reserves and reduce reliance on the U.S. dollar.
With central banks collectively owning around one-fifth of all gold ever mined, their large-scale purchases significantly influence global supply and demand. These acquisitions not only tighten available market supply but also send a strong signal of confidence in gold as a strategic, long-term asset.
2. Expectation around Interest Rates
Another reason why investors are turning to gold is the growing expectation of interest rate cuts by major central banks such as the U.S. Federal Reserve and the European Central Bank.
When rates are high, assets like savings accounts and bonds offer attractive returns, making non-yielding assets less appealing. However, as rate cuts come into view, the opportunity cost of holding gold declines.
In a low or falling interest rate environment, gold becomes comparatively more attractive, prompting investors to increase their exposure and further fueling demand for the precious metal.
3. Soaring Investor Demand
The sustained demand from both private and institutional investors seeking portfolio diversification evidently becomes one of the reasons why gold price increase continues.
Interest in physical gold, such as bars and coins, remains strong, while gold-backed ETFs and mutual funds continue to attract inflows even after significant price gains.
These investment vehicles have transformed access to gold by allowing exposure without the challenges of storing bullion, making gold more accessible than ever.
In times of market volatility, gold’s long-standing role as a stabilizing asset becomes especially appealing, reinforcing investor confidence and pushing prices higher.
4. Economic and Geopolitical Uncertainty
Geopolitical tensions and economic instability remain powerful drivers behind why gold prices increase during turbulent periods. When markets face heightened volatility, political conflicts, or economic crises, investors often seek protection from potential losses. For centuries, gold has been viewed as a reliable safe haven, valued for its historical stability and low correlation with traditional assets such as stocks and bonds.
5. Currency Diversification
The price of gold often moves in the opposite direction of the U.S. dollar, making currency trends a key factor in gold price movements.
Because gold is typically priced in dollars on global markets, a weaker dollar makes the metal more affordable for international buyers, boosting demand and pushing prices higher.
At the same time, growing efforts by countries and investors to diversify away from dollar-based assets have strengthened gold’s role as a neutral and universally accepted store of value, further supporting its upward price trend.
The reasons why gold price increases can be traced to a powerful drive of central bank buying, shifting interest rate expectations, rising investor demand, and ongoing geopolitical and economic uncertainty.
If you’re considering adding gold to your portfolio, don’t miss our guide on the best countries to buy gold to help you make a smarter and more strategic investment decision.
Read: Indonesia's Finance Minister Plans Major Reshuffle of Customs Officials
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