The Underlying Logic Behind Gold’s Price Surge
A single timeline explains why gold has risen all the way from the pandemic era to 2025.
🟡 One-Sentence Summary:
Pandemic money printing increased liquidity → The energy crisis drove up prices → Central banks first hiked, then cut rates → “Real interest rates” fell and cash became less attractive → Both central banks and investors rushed to buy gold → Gold prices soared through 2025.
1) The Pandemic Era: The Money Faucet Fully Opened 💧
When COVID-19 hit in 2020, governments worldwide unleashed massive stimulus to save their economies. The U.S. Federal Reserve slashed interest rates to near zero and began large-scale bond purchases—essentially flooding the market with money.
At the same time, Congress passed the $2.2 trillion CARES Act. These measures stabilized the economy but planted the seed for “too much money, possible future inflation.”
Key takeaway: More money doesn’t cause instant inflation, but it makes future price increases far easier.
2) The Energy Crisis: Pouring Fuel on the Fire 🔥
From 2021 to 2022, supply chains were still fragile when the Russia-Ukraine conflict sent oil and gas prices soaring. Once energy costs rise, everything—from transport to electricity to raw materials—becomes more expensive.
The result? Real inflation arrived. U.S. inflation hit 9.1% in June 2022, a 40-year high, while European natural-gas prices reached record levels.
Key takeaway: Energy is the “foundation cost” of everything. When the foundation rises, all prices rise.
3) Rate Hikes: Cooling Inflation, but Slowing Growth 🧊
To fight runaway inflation, central banks aggressively raised interest rates, making money more expensive and discouraging borrowing and spending.
This successfully cooled inflation but also increased interest burdens for companies and households—eventually slowing economic activity.
The Fed’s own reports show a clear shift toward monetary tightening from 2021 to 2023.
Key takeaway: Rate hikes are like hitting the brakes—effective against inflation, but they slow the economy too.
4) The Turning Point: Signals of Rate Cuts in 2024 🔄
Once economies began to slow, central banks had to ease up.
In June 2024, the Bank of Canada became the first G7 central bank to cut rates.
The European Central Bank followed the next day.
And on September 18, 2024, the Federal Reserve made its first rate cut of this cycle—marking the shift from tightening to easing.
Key takeaway: This was crucial. Gold doesn’t pay interest, so when rates fall, deposits and bonds lose their appeal—making gold’s “no-yield” disadvantage much smaller.
Historically, gold and real interest rates (nominal rate minus inflation) move like a seesaw: the lower the real rate, the stronger gold performs.
5) 2025: All Forces Align—Gold’s Surge Becomes Inevitable 🚀
By 2025, multiple forces converged:
✅ Falling rates & low real yields: The opportunity cost of holding gold dropped.
✅ Central-bank demand: This wasn’t retail hype—official buyers kept stacking gold. In Q1 2025, global central banks made net purchases of 244 tons, extending a multi-year trend.
✅ Safe-haven demand & a weaker dollar: Rising geopolitical and fiscal uncertainties made gold attractive, especially as a soft dollar made it cheaper for non-U.S. buyers.
Together, these factors pushed gold prices near all-time highs—approaching $3,900 per ounce by early October 2025, according to Reuters.
Key takeaway: Gold’s rise isn’t due to one cause—it’s the combination of low rates, central-bank buying, and global uncertainty.
🧩 The Whole Story in One Line
Pandemic money printing boosted liquidity → The energy crisis heated up prices → Central banks hiked rates, slowing economies → 2024 marked the pivot to rate cuts → Real yields fell, deposits lost appeal → Central banks kept buying, investors sought safety → Gold prices naturally surged through 2025.
