Gold prices are climbing to record highs again. Bullion crossed $4,400 an ounce for the first time on Monday, up 60% in 2025. Silver has also hit an all-time high, and other metals like platinum and palladium are doing well too.

One reason for the rally? Gold is the oldest of safe-haven investments, and it often rises when geopolitical tensions are high. See: U.S. policy towards Venezuela and the ongoing war in Ukraine.

Another possible factor in the rally are expectations that the Federal Reserve will keep cutting interest rates next year.

A lot of market analysts think that the Fed will cut rates at least twice next year, based on the direction the job market and inflation appear to be heading.

There are two reasons lower rates could make gold more interesting to investors. The first is straightforward, said Paolo Pasquariello, a finance professor at the University of Michigan. 

“In finance, when somebody wants to speculate on a financial asset, you want to make a bet on stock or a bond or on gold or silver, the way speculators do it is to borrow money in order to make the bet, “ he said.

Lower interest rates would make it cheaper to borrow money to buy a bunch of gold.

The second reason is a bit more conceptual. 

“Instead of buying gold and silver, you could keep money in the bank, and if you keep money in the bank, you'd be earning interest,” Pasquariello said. In, say, a certificate of deposit or money market account.

But if rates go down, the interest you get from the bank often goes down too. And even though gold doesn’t earn you any interest, it could become relatively more attractive. 

“An investor will want to get that money working somewhere else where they believe that they can get a higher yield. So gold has historically been their, like, go-to commodity on that,” said Phillip Streible, chief market strategist at Blue Line Futures. 

So, the expectation that more investors may flock to gold if rates fall could be part of the reason the metal’s price has been rising.

But the level of interest rates is not the only determinant of the price of gold, said Campbell Harvey, a professor of finance at Duke University

Another factor is a lot of countries that have historically invested in U.S. Treasury bonds because they’re a safe bet are feeling a bit less sure about them these days.

“Countries that are heavily weighted in U.S.-dollar assets are looking for something else defensive, and gold is at the top of the list,” Harvey said.

Those countries are buying it up too, increasing the demand and the price.