The year 2024 will go down in history as one of the most favorable and dynamic periods for the gold market. The precious metal’s price surged by 27% year-over-year, with investors witnessing as many as 40 record highs. Global geopolitical tensions, a shifting world order, and strategic purchases by central banks made gold one of the most profitable and significant investment assets of the year.
By December 30, 2024, gold had increased in value by 27% year-over-year, reaching numerous historic peaks driven by rising inflation, geopolitical uncertainty, and shifting monetary policies. Over the past 12 months, gold frequently surpassed $2,700 per ounce, stabilizing around $2,620 by the end of the year.
The “Asian Era” of Gold Trade?
Dubai emerged this year as the second-largest gold trading hub in the world, overtaking London. The total value of transactions exceeded $129 billion, up 36% from the previous year. The World Gold Council’s decision to open an office in Dubai and its partnership with the Dubai Multi Commodities Centre (DMCC) underscores the region’s growing prominence in the global gold trade.
According to DMCC, Dubai is spearheading the “Asian era” of gold trade, with Asian countries dominating global demand. Dubai has become a pivotal hub for the physical flow of gold, with DMCC playing a central role in organizing trade and attracting international commodity firms.
Meanwhile, the People’s Bank of China (PBoC) resumed gold purchases in November 2024, increasing its reserves by 5 tons to a total of 2,269 tons. This followed a pause in acquisitions from May to October, interrupting an 18-month streak of regular purchases. The resumption coincided with a global correction in gold prices, presenting a strategic buying opportunity for China.
Poland Emerges as a European Leader in Gold Purchases
The National Bank of Poland (NBP) became one of the global leaders in gold acquisitions, boosting its reserves from 228.67 tons to a record 441 tons. This significant increase solidified Poland’s position among Europe’s top gold holders. The NBP’s strategic decision to diversify and secure its gold in Poland, London, and New York reflects lessons from history and a commitment to risk minimization.
The surge in Poland’s gold reserves evokes historical parallels with the interwar period when gold symbolized economic stability and strength. In the lead-up to World War II, Poland amassed approximately 80 tons of gold, viewed as a substantial national asset. Safeguarding these reserves became a priority in 1939 as conflict loomed.
Investors Look to Trump and the Fed
Donald Trump’s victory in the 2024 U.S. presidential election, the year’s most significant political event, initially caused a dip in gold prices due to market euphoria and a strengthening dollar. However, the long-term effects of “Trumpism,” such as potential inflationary pressures and rising public debt, could drive gold prices higher in the future.
Despite some stabilization, U.S. inflation remains above the Federal Reserve’s target. The Fed implemented three rate cuts in 2024, significantly impacting the gold market. Cuts of 50 basis points in September and 25 basis points in November and December spurred interest in gold as a hedge against financial market volatility.
Gold is likely to remain a cornerstone of investment strategies, especially given the potential weakening of the dollar in coming years. The U.S.’s foreign policy under Trump, particularly regarding the war in Ukraine, adds another layer of uncertainty. While Trump has promised a swift resolution, the implications remain uncertain.
Could Gold Surpass $3,000?
2024 was a year of challenges and opportunities for the gold market. The rise of new trading hubs like Dubai and evolving monetary policies suggest that gold will stay in the spotlight. Forecasts for 2025 vary, with some analysts predicting further price increases.
Goldman Sachs estimates that gold could reach $3,000 per ounce by the end of 2025, even with a strengthening dollar. Key drivers include anticipated rate cuts by the Federal Reserve and heightened geopolitical uncertainty. UBS projects a price of $2,900 per ounce by the end of 2025.
Investors TFI predicts a 9.4% increase in gold prices by the end of 2025, suggesting a target of around $2,900 per ounce. However, the gold market is volatile, and unexpected shifts in monetary policy, inflation, or geopolitical events could significantly impact prices.
Four Key Factors for Gold in 2025
- Monetary Policy: Anticipated rate cuts by major central banks, particularly the U.S. Federal Reserve, could enhance gold’s appeal. Lower interest rates reduce bond yields, prompting investors to seek alternative assets.
- Inflation: Gold traditionally serves as a hedge against inflation. The Fed’s revised plans indicate only two rate cuts (totaling 50 basis points) in 2025, highlighting lingering inflationary pressures.
- Central Bank Demand: Continued gold purchases by central banks, particularly in countries like China, could sustain upward price momentum. Such acquisitions often aim to diversify reserves and reduce reliance on the U.S. dollar.
- Geopolitical Tensions: Global conflicts and political uncertainty bolster gold’s reputation as a “safe haven” asset, driving demand and prices. The ongoing war in Ukraine and developments in the Middle East will be pivotal.
A Bright Future for Gold?
The shifts in trading hubs, central bank strategies, and monetary policies point to a promising future for gold. While 2024 was marked by unprecedented growth and new records, 2025 could bring even greater opportunities—or challenges—for investors.
Michał Tekliński, Gold Market Expert, Goldsaver.pl, Goldenmark Group
Source: Manager Plus
