Gold had a remarkable year in 2024, breaking records and seeing its largest annual surge in 14 years. Analysts are now debating whether the yellow metal could climb even higher, potentially hitting $3,000 per ounce by the end of 2025.
Spot gold closed the year at $2,611 on Christmas Eve, a 27% rise from the end of 2023. This marks the biggest annual jump since 2010, when prices soared nearly 30%. October 2024 saw gold hit an all-time high of $2,790.07 per ounce, a 35% increase from the previous year.
Central Banks and Geopolitics: The Driving Forces
“Gold’s rally in 2024 was driven by many factors, ranging from the buying spree of many central banks, including the People’s Bank of China, as they want to invest their reserves in gold and diversify from holding US dollar assets,” said Anderson Cheung, head of global commodities at Best Profit Capital.
Central banks collectively purchased 694 tonnes of gold in the first nine months of the year, according to the World Gold Council. While this is lower than the record 1,082 tonnes bought in 2022, it highlights sustained interest in gold as a strategic reserve.
Geopolitical tensions have also played a significant role. The Russia-Ukraine war and ongoing Middle Eastern conflicts have driven investors toward safe-haven assets like gold.
The Trump Effect
The potential return of Donald Trump to the White House could further influence gold prices. Cheung noted, “Investors are likely to take a wait-and-see approach to get a clear idea of what Donald Trump’s policies mean for the world economy.”
Cheung expects gold prices to undergo a correction in the first half of 2025, possibly falling to $2,400–$2,700 per ounce, before rebounding toward $3,000. “Trump’s policies are generally pro-business, but the threat of tariffs could strengthen the US dollar in the first half, which would add pressure on gold prices,” he said.
By the second half of the year, however, anticipated interest rate cuts and continued central bank buying could push prices higher, echoing patterns seen during Trump’s 2016 election.
Optimism Tempered by Challenges
Stephen Innes, managing partner at SPI Asset Management, shares a similar outlook. “A recent World Gold Council survey showed 81% of respondents expect central banks to bolster their gold reserves in the coming year, underscoring a potentially bullish outlook for gold,” he said.
However, Innes cautioned against over-optimism. “This optimistic trajectory might be moderated by profit-taking, market corrections, and the burgeoning allure of cryptocurrencies like Bitcoin, which are siphoning off some traditional investments from gold.”
China’s slowing economy and a potential depreciation of the yuan could also play a pivotal role. Innes suggested that such a move could drive local demand for gold as a hedge against currency weakness.
But gold faces significant headwinds, including the possibility of a pause in Federal Reserve rate cuts, which could bolster the US dollar and reduce gold’s appeal. Additionally, any de-escalation in Eastern Europe could lower geopolitical risks, further diminishing gold’s safe-haven status.
Hong Kong’s Bid to Shine
In Hong Kong, efforts are underway to bolster the city’s reputation as a global gold trading hub. The Chinese Gold & Silver Exchange Society recently rebranded itself as the Hong Kong Gold Exchange, a move aimed at attracting international traders.
Haywood Cheung Tak-hay, chairman of the exchange, revealed plans to hold roadshows in overseas markets to draw new members. “This is part of the government’s ambition to reboot Hong Kong as an international gold trading hub,” he said.
A Golden Future?
While the path to $3,000 gold is far from guaranteed, the combination of central bank buying, geopolitical uncertainty, and rate cuts could set the stage for another record-breaking year. Still, the market is volatile, and investors should brace for potential corrections along the way.
