How investors buy gold and what fuels the market

Gold surged to a record high above $5,000 an ounce on Monday, extending a historic rally as investors piled into the safe-haven asset amid rising geopolitical tensions.

Bullion added 64% to its value in 2025, its biggest annual rise since 1979, driven by a mix of safe-haven demand, bets on US rate cuts, robust central-bank buying, de-dollarisation trends and inflows into exchange-traded funds. It is up 18% so far this year.

Here are some ways to invest in gold:

Spot market

Large buyers and institutional investors usually buy gold from big banks. Prices in the spot market are determined by real-time supply and demand dynamics.

London is the most influential hub for the spot market, with the London Bullion Market Association setting standards for gold trading and providing a framework for the over-the-counter market to facilitate trades among banks, dealers and institutions.

China, India, the Middle East and the US are other major gold-trading centres.

Futures market

Investors can also get exposure to gold via futures exchanges, where people buy or sell a particular commodity at a fixed price on a particular date in the future.

COMEX, part of the New York Mercantile Exchange, is the largest gold futures market in terms of trading volumes.

The Shanghai Futures Exchange, China's leading commodities exchange, also offers gold futures contracts. The Tokyo Commodity Exchange, popularly known as TOCOM, is another big player in the Asian gold market.

Exchange-traded products

Exchange-traded products or exchange-traded funds issue securities backed by physical metal, allowing people to gain exposure to gold prices without taking delivery of the metal itself.

Global gold ETFs saw record inflows in 2025, led by North American funds, according to World Gold Council data. Annual inflows surged to $89 billion.

Bars and coins

Retail consumers can buy gold from traders selling bars and coins in shops or online. Gold bars and coins are both effective means of investing in physical gold.

Investors in top consumers China and India have moved more towards purchasing bars and coins as opposed to jewellery amid surging spot prices.

What drives the market?

Investor interest and market sentiment

Rising interest from investment funds in recent years has been a major factor behind bullion's price moves, with sentiment driven by market trends, news and global events fuelling speculative buying or selling of gold.

Foreign exchange rates

Gold is a popular hedge against currency market volatility. It has traditionally moved in the opposite direction to the US dollar, since weakness in the US currency makes dollar-priced gold cheaper for holders of other currencies and vice versa.

Monetary policy and political tensions

The precious metal is widely considered a safe haven during times of uncertainty.

US President Donald Trump's trade tariffs have over the last year sparked a global trade war, rattling currency markets.

Trump's capture of Venezuelan leader Nicolas Maduro and aggressive statements on acquiring Greenland have added to volatility since the start of 2026.

Global central banks' policy decisions also influence gold's trajectory. Lower interest rates reduce the opportunity cost of holding gold, since it pays no interest.

Central bank gold reserves

Central banks hold gold in their reserves, and demand from this sector has been robust in recent years because of macroeconomic and political uncertainty.

The World Gold Council said in its annual survey in June that more central banks plan to add to their gold reserves within a year despite high prices.

Net central bank purchases in November totalled 45 metric tons, World Gold Council data showed, pushing the figure for the first 11 months of 2025 to 297 tons as emerging market central banks continued their significant gold buying.

China kept adding gold to its reserves, with its holdings totalling 74.15 million troy ounces at the end of December from 74.12 million in the previous month as it extended its buying spree for the 14th month in a row.

Poland's central bank, which held 550 tons of gold at end-2025, aims to lift reserves to 700 tons, Governor Adam Glapinski said this month.