Gold’s ascent through $4,000 an ounce is yet another milestone in a three-year bull run that has defied die-hard skeptics and broken analytical models that have reliably predicted its rises and falls for decades.

Here is the story of how bullion shook off its reputation as a barbarous relic and muscled its way back toward the center of the global monetary system.

Pandemic milestone

After being shunned by investors and central bankers for much of this century, gold’s turnaround began in the panic of the pandemic, when it broke through $2,000 an ounce. The rally gathered fresh momentum in the wake of the invasion of Ukraine, with central banks and Chinese investors driving a 27% gain in 2024, before Donald Trump’s return to the White House helped launch gold emphatically over the $3,000 hurdle in March.

In the latest leg of its blistering rally, almost every almost every major macroeconomic has lent gold a tailwind, with the U.S. government shutdown and a weakening dollar sending the market into overdrive.

Inflation-adjusted peak

Last month, gold also eclipsed its inflation-adjusted peak set more than 45 years ago, when prices topped out at $850. When gold hit that high in January 1980, the U.S. was grappling with a collapsing currency, a spike in inflation and an unfolding recession. The price had doubled over the previous two months, after U.S. President Jimmy Carter issued a freeze on Iranian assets in response to a hostage crisis in Tehran, raising the perceived risk of holding dollar assets for some foreign central banks. For some gold bulls, there are faint echoes of those conditions today.

Overtaking treasuries

Throughout the rally, central bankers have been a dominant force in the market, buying up bullion in such huge volumes that it prompted analysts and traders to build new models to keep track of this resurgent source of demand. The buying has been motivated by a drive to diversify away from the dollar and shield their assets from hostile nations — and while gold may never return to being the bedrock of the global monetary system it once was, the value of bullion has already almost certainly well surpassed the amount of Treasuries held by non-U.S. central banks in their foreign exchange reserves.

It’s still well below the global foreign exchange reserves held in all dollar-denominated debt, but the rally also saw gold overtake the euro as the second-largest asset in the reserves of the world’s central banks earlier this year. The rally has arguably been a boon for the U.S. as well, with the market value of its holdings surpassing $1 trillion last month — more than 90 times what’s stated on the government’s balance sheet.

China steps back

As in 2024, Chinese buying was a key tailwind for gold in the first four months of the year, with Trump’s tariff plans roiling global markets, and unleashing a fresh wave of demand for safe haven assets in China.

The strength of Chinese buying can be seen in the so-called "Shanghai premium”, the spread between the benchmark spot price in London and prices on Chinese exchanges. Yet Chinese gold prices have slipped below the benchmark in recent months, even as the precious metal found new highs — signaling that Western investors have been the key force in gold’s latest push higher.

Chinese markets re-open Thursday after being closed for the Golden Week holiday, and a key question for traders is whether they will give a thumbs up, or a thumbs down, to gold above $4,000 an ounce.

ETF holdings surge

For Western gold buyers, both retail and institutional, bullion-backed exchange traded funds are one of the most popular ways to get exposure to gold. When an investors buys a share in a gold-backed ETF, the trust that runs it must buy a corresponding amount of gold to reflect the new holdings— inflows that drive bullion prices higher.

Holdings in some of the biggest of those funds surged to a record during the pandemic, before entering a long descent as buyers took profits. Those outflows finally reversed in mid-2024, and since then more than 16 million ounces have piled into the funds. Still, ETF holdings still have a long way to go to match their pandemic highs — a hopeful sign for gold bulls already focused on the next milestone.

"The move above $4,000 is not simply a function of rate expectations or a weaker dollar. Rather, it reflects a deeper shift in investor psychology and global capital flows,” said Ole Hansen, a commodities strategist at Saxo Bank AS. "Sanctions, asset seizures, and concerns about fiscal sustainability have nudged investors-both institutional and sovereign-toward tangible assets that sit outside the financial system.”