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The price of gold has shot to record highs as the US dollar sank to its weakest since 2021.
Last updated: 29 January 2026
Gold surged past $5,500 per troy ounce this week, a record high for the safe-haven metal that took in a near five per cent increase across a single day of trading.
Seen as a safe investment free from geopolitical and economic risk, gold has always performed well at times of stress. But why is its value exploding now, when stock markets around the world are booming and the AI frenzy is kicking into overdrive? This article looks at a wild period in currency markets (as well as the entire financial system) and how that is having a tangible impact on the price of gold.
We also included a deep dive on precious metals in our January-March Quarterly Forecast. Download your free copy to see why gold and silver have both soared to new heights in the past two years.
What is driving currency volatility?
Foreign exchange markets have been buffeted by headwinds to start 2026. The US dollar – still the world’s hegemonic reserve asset – has been the G10’s worst performing currency so far this year as fears over trade, the Federal Reserve and the Trump administration’s erratic take on international diplomacy have limited demand.
If the Greenland saga shook faith and prompted high-profile exits from American investments by some European sovereign funds, recent events surrounding the immigration crackdown have only worsened things. In a signal that investors were seeking a return to traditional safe-havens, the Swiss franc reached a ten-year high this week even as the US dollar plunged by almost five cents against the pound.
Japan was very much the catalyst for recent volatility. When new Prime Minister Sanae Takaichi announced a snap general election, the Japanese yen crumbled, bond yields pushed the cost of borrowing up to crippling levels, and the government had to seek help from an old ally. Enter the United States.
What’s going on with the US dollar?
Last week, fears swirled that the American government was actively trying to drive down the value of the US dollar. Why would it do that? To cheapen the cost of exports and render imports economically unviable, in essence, which in theory would have a positive impact on the domestic manufacturing sector.
After reportedly intervening to help the Japanese government stabilise the yen, US treasury secretary Scott Bessant was forced to state publicly that he was committed to a ‘strong dollar’ policy. His words may have helped calm things a little, but the talk of the town remains debasement. This is the idea that gold will strengthen as investors lose faith in the US dollar, government bonds and other blue-chip holdings.
The chart below gives you some idea of how far the dollar has fallen. Risks to its reputation as the world’s dominant currency abound, from the independence of the Federal Reserve to President Trump’s grip on political affairs.
GBP/USD: the past month
Will the price of gold stay this high?
Given the price of gold is so closely linked to fickle foreign exchange markets, it really is very hard to say. At a basic level, the recent extreme movements in gold appear hard to sustain over a long period. There might just be enough optimism in the economic outlook to drive the US dollar higher, particularly if a government shutdown is avoided and the White House follows through with its recently more conciliatory rhetoric. But equally, should the present uncertainty stick around, the bubble might swell rather than pop.
The chart below shows those truly staggering movements. It goes without saying that a 20% increase in the price of gold since the start of January is not a signal of a stable and thriving market.
What can my business do to protect its profit margins?
Market turmoil can have a ruinous effect on any business exposed to fluctuating rates. Budgeting for one rate and receiving another when payment comes due is enough to blow any enterprise off course, particularly those that don’t have protections in place should markets move against them.
The key to effectively managing this risk is in the planning. Having a comprehensive risk management policy will help insulate your profit margins and protect (or possibly even enhance) your cashflow.
Speak to a treasury expert today by calling 020 7898 0500. Our team will be happy to discuss solutions that compliment your strategic objectives and risk appetite.
