Gold prices saw a notable decline this week, but experts say that those focusing on the drop are missing the forest for the trees.
The price of gold fell to under $4,100 per troy ounce during the recent selloff. By Wednesday evening, it had bounced back a bit and was trading at just over $4,100. At some points on Wednesday, it was over 4% lower than five days ago.
Gold is seen as a safe-haven asset and typically does well in times of upheaval. Investors might invest in gold if they are concerned about geopolitical or economic risks. And for months, investors have been buying up the precious metal, pushing it to new highs.
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A lot of global uncertainty in the financial markets this year has come from the sweeping tariffs and other trade escalations that have happened since President Donald Trump entered office. There was increased optimism that a trade deal would be reached with China, which might have dampened gold prices to some extent.
“I think anything that helps to address concerns about international discord works against the purchase of gold,” Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner.
While the plunge in gold prices this week is of interest, if investors zoom out, the overall growth in the price of gold is a much bigger deal.
Current gold prices, as of Wednesday, represent a 9% increase from just a month ago, a 20% increase from six months ago, and an enormous 54% growth in value from the start of the year.
Compare that to the stock market, the S&P 500 has notched gains of about 14% since the start of the year, the tech-heavy Nasdaq is up nearly 18%, and the Dow Jones Industrial Average has grown 9.9% in that same time period.
Campbell Harvey, a professor at Duke University’s Fuqua School of Business, characterized the latest dip in gold prices as a “correction,” and he said a correction was not unexpected. Harvey said his research reflects this.
“When the real price of gold, so the inflation-adjusted price of gold, is really high, then historically, the expected return going forward is low or negative,” Harvey told the Washington Examiner.
He also said that some of the upward price pressures on precious metals come from the demand for gold from central banks in countries that are trying to de-dollarize.
Alongside gold’s rise this year, the value of the dollar has fallen.
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The dollar index was 98.9 on Wednesday, up from a month ago, but down from the start of the year. The Bloomberg Dollar Spot Index registered as high as 110 in early January. The relative value of the greenback has fallen more than 10% since the start of 2025.
The phenomenon is particularly notable given that some economists might have expected the dollar to strengthen with greater tariffs. However, experts cite a variety of factors, including uncertainty about fiscal and monetary policy and uncertainty about the future of tariff policies themselves, as part of the reason the dollar has slumped.
