Gold Experiences a Notable 26% Increase in 2024, Suggesting Uptrend Persists into 2025.
Gold Experiences a Notable 26% Increase in 2024, Suggesting Uptrend Persists into 2025.
In the last day of trading commodities in 2024, one valuable metal wrapped up the year with impressive growth - gold.
Closing trade in Asia on a Tuesday, gold surged by nearly 27% for the year, settling at $2,626.80/ozt; one of its highest annual growth rates this century and its largest since 2010. Spot prices slightly dropped to around $2,614/ozt in Dubai.
A string of record-breaking surges throughout the year propelled gold to an all-time high of $2,790/ozt on October 31, followed by a slight downturn. A year of substantial gains was mostly attributable to interest rate cuts by the U.S. Federal Reserve in the latter half of 2024.
Investors flocked to gold bullion as a sanctuary in a volatile market, despite it being a non-yielding asset, triggering a demand frenzy.
Similarly, several central banks followed a pattern akin to their actions during the global financial crisis of 2008-09 and the shift towards lower interest rates.
Why Gold Rally Might Prolong to 2025
The trajectory of U.S. interest rates will continue to influence the gold price. The Fed reduced rates in September, November, and December but also signaled fewer cuts in 2025.
However, this may not mean the end of the gold rally. The incoming U.S. President Donald Trump's trade policies might play a vital role in influencing inflation. This, in turn, could impact interest rates and, consequently, the price of gold.
High interest rates might diminish gold's appeal for investors but it is also regarded as a safeguard against excessive inflation.
Further support might emanate from the world's central banks, even with a slower rate of buying in the third quarter of 2024.
Central bankers are likely to remain "gold-obsessed" in 2025, with the Reserve Bank of India and the National Bank of Poland spearheading this trend, according to economists at ING.
Can Gold Reach $3,000 in 2025?
Various geopolitical threats, such as those in the Middle East and Ukraine, as well as a potentially strained U.S.-China relationship, will uphold gold prices. Therefore, a stronger U.S. dollar and a slower pace of U.S. interest rate cuts might not curtail gold's rally.
Gold turned out to be one of the standout performers in the broader commodities market in 2024, exhibiting consistent rises towards the year-end, while other metals, both precious and industrial, primarily struggled due to slower economic growth in China.
Discussions in the market now revolve around whether or not gold can breach the psychological $3,000/ozt barrier. The yellow metal is edging closer to this mark. Its ascent and investor interest have been unwavering.
Many, including Goldman Sachs and Bank of America, anticipate such a price level to be achievable, particularly in the second half of 2025.
Of course, the macroeconomic and geopolitical environment in the first half of the year will ultimately decide gold's direction, with many tentatively predicting an upward price trend for an already expensive precious metal.
- Central banks' buying of gold in 2025, reminiscent of their actions during the 2008-09 financial crisis, could further fuel the gold rally.
- The continuing decline of U.S. interest rates, signaled by the Federal Reserve in 2025, might contribute to the continuation of the gold rally, potentially pushing gold prices towards $3000.
- Geopolitical risks, such as those in the Middle East and Ukraine, and a strained U.S.-China relationship, could serve as a safe haven for investors, leading to a rally in gold prices and potentially allowing gold to hit the $3000 mark in 2025.
- The US President Donald Trump's trade policies in 2025 could influence inflation, which in turn could impact interest rates and gold prices, potentially helping gold rally and reach $3000.
- According to forecasts from Goldman Sachs and Bank of America for 2025, gold could hit the $3000 mark, given its strong performance in 2024 and the expectation of a slower economy in China that may drive investors to safe haven assets like gold.