By K Raveendran
The year 2024 marked a historic period for gold, perhaps fit to be called the ‘Year of Gold’ due to the yellow metal’s remarkable performance across various metrics. Total demand for God surpassed an unprecedented US $100 billion, underpinned by robust investment activity and a supportive macroeconomic backdrop.
This astounding demand surge was accompanied by record-high prices, as Gold consistently breached new peaks, particularly during the third quarter. The average price for this quarter stood at an astonishing US $2,474 per ounce, representing a year-on-year increase of 28 percent, underscoring not only the heightened valuation of gold but also the strong sentiment among investors, which propelled this trajectory.
One of the most significant drivers of Gold’s success in 2024 was the remarkable recovery and growth in global investment demand. This segment more than doubled year-on-year, a clear reflection of the shifting market dynamics. Western investors, in particular, played a pivotal role by channelling their resources into gold-backed ETFs, reversing prior trends of stagnation or decline in these assets. The strong inflows into ETFs highlighted a broader shift in sentiment, as concerns over global economic stability and geopolitical risks encouraged diversification into assets perceived as safe havens. These developments indicate that gold’s allure as a hedge against uncertainty remains steadfast among institutional and retail investors alike.
Central banks also continued to demonstrate their faith in Gold, albeit at a slower pace during the third quarter. Central bank buying had been a significant pillar of support for Gold demand in prior quarters, reflecting a broader trend of diversification away from traditional reserve assets such as the US dollar. While the overall pace of purchases decelerated, notable activity persisted, with India emerging as the largest reserve buyer during Q3. This development highlights the strategic importance of Gold in the monetary policies of emerging economies, as they seek to bolster Gold reserves and reduce dependence on foreign currencies. India’s role in this context is particularly noteworthy, as it reflects not only a strategic decision but also the country’s cultural and economic affinity for Gold.
Despite these impressive achievements, the outlook for Gold in the coming year may face headwinds. The impending transition to the Trump administration introduces a level of uncertainty that could alter the dynamics of the precious metals market. Historically, Gold has thrived in environments of heightened economic and geopolitical risk, and its performance has often been inversely correlated with the strength of the US dollar. The Trump administration’s policies, which may prioritize economic growth and potentially strengthen the dollar, could pose challenges for Gold prices. Furthermore, any shifts in interest rates or fiscal policies that favour riskier assets might dampen Gold’s appeal as a safe haven.
Such factors create a complex environment for Gold as it moves into 2025. On the one hand, the record-breaking achievements of 2024 underscore the enduring appeal and resilience of Gold as an asset class; on the other hand, the potential policy changes and macroeconomic shifts on the horizon highlight the volatility and unpredictability inherent in the market. For investors, these dynamics underscore the importance of maintaining a balanced and diversified portfolio, as the drivers that propelled Gold to unprecedented heights in 2024 may not necessarily persist in the coming year.
The extraordinary performance of Gold in 2024 was a confluence of several interrelated factors, including macroeconomic uncertainty, strategic investment shifts and enduring cultural and monetary significance. However, the evolving global landscape serves as a reminder that while Gold remains a critical asset, its trajectory is subject to the broader currents of economic and political change. The coming year will reveal whether Gold can sustain its momentum or if it will encounter new challenges in a shifting global environment. (IPA Service)
