Gold prices delivered an exceptional performance in 2024, outpacing all major asset classes and cementing their status as a robust portfolio diversifier. The price of gold surged by an impressive 25.5% last year, driven by its role as an effective hedge against the heightened geopolitical uncertainty and market volatility that characterised 2024.
As 2025 begins, market consensus points to a more modest performance for gold prices this year, though upside catalysts could emerge as the year unfolds.
Factors Supporting Gold Prices in 2025
Several factors are likely to provide support for gold prices in 2025:
- Central Bank Demand: Continued robust purchases by central banks, particularly from emerging markets, will remain a key driver.
- Flight-to-Quality Flows: Any rapid deterioration of financial conditions or heightened geopolitical tensions could prompt investors to seek refuge in gold.
- China’s Market Contribution: Chinese consumers have largely been on the sidelines, while investors have propped up demand. A resurgence in consumer activity could add further support.
However, challenges such as higher interest rates stemming from potential monetary policy reversals could weigh on prices.
Record-Breaking Year for Gold in 2024
According to the World Gold Council’s latest report, the LBMA Gold Price PM reached 40 all-time highs in 2024, with the most recent peak at $2,777.80 on 30 October. In the third quarter alone, total gold demand exceeded $100 billion for the first time.
The surge was attributed to strong investor demand offsetting weaker consumer demand, alongside geopolitical risks from global conflicts and a busy electoral year. Lower market yields and a weakening U.S. dollar also played a significant role in the rise.
Factors Impacting Gold Prices in 2025
Monetary Policy:
The Federal Reserve is expected to implement 100 basis points in rate cuts by the end of the year, which historically supports gold prices. European central banks are also likely to follow suit. While a dovish stance will benefit gold, any prolonged pause or reversal could suppress investment demand.
U.S. Dollar:
The U.S. dollar is projected to remain flat or weaken slightly, which would favour gold. However, global growth is expected to remain below trend, and other drivers such as inflation and geopolitical risks will also play a part.
Central Bank Purchases:
Central banks have been net buyers of gold for nearly 15 years. In 2024, they collectively added a net 53 tonnes to global official holdings in November alone. While annual demand may fall below record levels, it is expected to remain strong in 2025, contributing positively to gold prices.
Key Risks and Opportunities
Geopolitical Instability:
Ongoing conflicts, such as those in South Korea and Syria, coupled with concerns over European sovereign debt, could bolster demand for gold as a hedge against risk.
Trade Wars:
China and India the two largest gold markets account for over 60% of global demand. Any disruptions from potential trade wars or economic slowdowns in these regions could significantly impact gold prices.
Central Bank Policy:
While central bank buying is expected to remain strong, a deceleration below the 500-tonne mark could add pressure on gold prices. Conversely, demand exceeding this level would provide additional support.
Outlook for Gold in 2025
The World Gold Council projects that if global economic conditions align with consensus expectations, gold prices will likely trade within a range similar to the latter part of 2024, with potential for modest upside. Factors such as central bank demand, geopolitical risks, and monetary policy will continue to play pivotal roles.
At GoldCompany, we monitor these trends closely to help our clients make informed decisions. Whether you’re looking to invest in gold or sell your precious metals, our expertise ensures you get the best value in the market.
For more insights or assistance, contact GoldCompany.
