Gold is a hedge against risks…and an unstable investment

Last Friday (before the market closed), gold prices in the eastern United States recorded $4,522.22 per ounce, representing an increase of 0.57% within 24 hours, while the lowest trading price was $4,367.19 per ounce, and the highest spot price of gold was $4,542.56 per ounce.

Compared to last week, the price of gold increased by 0.3%, while it decreased by 0.48%, compared to last April, and the highest price of gold in 52 weeks reached $5,597.23, while its lowest price reached $3,248.98.

The “spot gold price” represents the current price at which gold can be bought or sold for immediate delivery, and is usually measured in US dollars per Troy Ounce, a unit of weight used globally to measure gold, silver and platinum.

One “troy ounce” is considered heavier than a “standard ounce” by about 10%.

Investing in gold

Investing in gold is one way to hedge risks or diversify an investment portfolio. During the past five years, the price of gold rose by 137.22%, while the Standard & Poor’s 500 Index achieved a return of 79.65%.

However, gold prices can be highly volatile, and this also means that gold is not a completely stable investment. It is also possible to build a diversified investment portfolio without resorting to gold, by investing in other alternatives such as investing in: private stocks, digital currencies, real estate, and private debt, to name a few.

time of purchase

The decision to buy gold now depends on the individual’s personal investment goals, his ability to bear risks, his time horizon, his general view of the economic situation and the expectations of the gold market, as gold is usually seen as a hedge against inflation or currency fluctuations, or as a safe haven during periods of economic recession.

Among the factors affecting the price of gold: ongoing inflation, as repeated reports of inflation exceeding the US Federal Reserve’s 2% target affect prices, and individual investors usually turn to gold when they are concerned about a decline in their purchasing power.

Currency fluctuations are also considered a factor affecting the price of gold, as a weak dollar, for example, may make gold more accessible to international buyers, increasing demand for it and raising its immediate value.

The high ratio of US debt to GDP affects the price, as a high ratio of US debt to GDP may raise concerns about the decline in the value of the currency, which prompts some investors to hedge with gold.

Central bank policies play a role in influencing prices, as, according to the latest survey conducted by the World Council of Central Bank Gold Reserves, more global banks are enhancing their gold reserves to diversify their investments away from the dollar in light of the trade wars, and a survey indicates that buying gold is likely to continue, as institutions are trying to reduce their dependence on the dollar.

Gold price history

Historically, gold prices rose after the United States abolished the gold standard system in 1971. The gold standard was a monetary system that linked the US dollar to a specific amount of gold. With the abolition of this standard, gold prices became free to trade.

Then gold prices witnessed a noticeable rise during the 1970s, a period also marked by severe inflation, and the price of gold reached its peak around 1980, exceeding $600 per ounce.

Although gold prices fell in the 1980s and 1990s, they remained stable, often ranging between $300 and $400 per ounce. The price of gold also fell to less than $300 per ounce in the 1990s, due to low inflation and the expansion of the economy.

Gold regained its momentum during the Corona pandemic, reaching $2,000 per ounce in 2020, and since that date the price of gold has remained strong, given inflation and other economic factors. Gold crossed the threshold of $3,000 per ounce in March 2025, and reached its peak, i.e. 5597.23, on January 29, 2026.

Gold investments are usually used to offset stock market declines within a diversified investment portfolio, and with regard to gold being a means to hedge against inflation, studies indicate that there is a correlation between inflation and gold at times, while this correlation is negative at other times. About Forbes