How Much Higher Will Gold Go?

During the final stretch of 2025, investors gradually began to rotate capital out of volatile growth stocks and seek more durable safe havens. Specifically, the spot price of gold soared 26% during the fourth quarter, and rose 65% during the entire year.

Even though we're only a little over a month into 2026, the momentum behind gold's rally doesn't appear to be fading. With the commodity currently hovering just below $5,000 per ounce, smart investors are surely wondering how much higher the precious metal can soar.

Let's dig into the tailwinds fueling a rising appetite for gold and assess if now is a good time to buy.

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Why is the price of gold going up?

Broadly speaking, gold prices move in cycles and are highly correlated with macroeconomic factors. In particular, uncertainties around the Federal Reserve's monetary policy outlook, as well as lingering inflation levels, have driven newfound interest in gold.

When interest rates are low or are expected to be reduced, investors may choose to allocate some capital toward gold, given the declining opportunity cost of holding on to a store of value asset.

Right now, some economists anticipate that the Fed may continue reducing interest rates at some point this year. Moreover, inflation's connection with the U.S. budget deficit has strengthened gold's role as a safeguard against eroding purchasing power and currency debasement.

Will gold continue rising throughout 2026?

One reason gold may continue to rise throughout 2026 revolves around sovereign demand. Given the amount of geopolitical tension across Europe, the Middle East, and South America, in conjunction with an ever-changing tariff policy agenda out of Washington, D.C., central banks have started to increase their gold reserves.

The rationale behind these decisions is that gold is viewed as both neutral and liquid, making it a shield against more pronounced volatility in the stock or bond markets. From a structural point of view, rising sovereign demand is creating a floor price for gold as the strength of the U.S. dollar becomes increasingly speculative.

Against this backdrop, gold could very well be on pace to outperform the stock market for a second year in a row.

Should you invest in gold right now?

In the long run, the price of gold will continue to be a function of the interest rate environment, as well as perceptions around fiat currency risk. What investors need to understand is that, like all assets, gold will experience pullbacks. During periods of strong economic growth and rising yields, owning gold becomes less appealing, as investors can generate more income through other vehicles.

In my view, the best way to invest in gold is through the SPDR Gold Shares ETF (NYSEMKT: GLD). This fund allows investors to gain direct access to gold in a liquid, cost-efficient way.

What I mean by this is that you will be able to complement your existing stock positions through a passive fund that tracks the price of gold. This allows you to benefit from gold's price appreciation while removing the risk or friction involved with owning physical bullion.

Given the number of uncertainties facing the macroeconomy and geopolitical landscapes, I do think now is an opportune time to hedge your stock positions with some allocation to gold.

Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.