On the final day of commodities trading in 2024, one precious metal ended the year’s proceedings having recorded some pretty spectacular gains – gold.
At the close of trading in Asia on Tuesday, the yellow metal ended up nearly 27% for the year at $2,626.80/ozt; one of its highest annual appreciation rate this century and its biggest since 2010. Spot prices trailed marginally at around $2,614/ozt in Dubai.
A series of record-breaking rallies for much of the year saw gold climb to an all time high of $2,790/ozt on October 31, before a cooling off. A year of significant gains largely came courtesy of interest rate cuts by the U.S. Federal Reserve in the latter half of 2024.
Investors seeking a safe haven in a volatile world also parked their money in gold bullion in greater numbers despite it being a non-yielding asset, and sparked a demand frenzy.
As did several central banks, reminiscent of their actions during the global financial crisis 2008-09 and the transition to a low interest rate climate.
Here’s Why Gold Rally May Extend To 2025
Of course, the U.S. interest rate outlook will be a primary driver of the direction of the gold price. The Fed cut rates at pace in September, November and December but also hinted at fewer cuts for 2025.
However, this may not necessarily spell the end of the gold rally. Incoming U.S. President Donald Trump’s trade policies may take center-stage in shaping inflation. That will likely have an impact on the direction of interest rates and, as a domino effect, the price of gold.
High interest rates may reduce the allure of gold for investors but it is also considered to be hedge against rampant inflation.
Support may continue to arrive from elsewhere, including from the world’s central banks, despite a slower rate of buying in the third quarter of 2024.
Central bankers will likely remain “bullion hungry” in 2025, with the Reserve Bank of India and the National Bank of Poland leading the pack, according to economists at ING.
Can Gold Hit $3,000 in 2025?
Myriad geopolitical risks from the Middle East to Ukraine as well as a possibly fractured relationship between the U.S. and China will also be supportive of gold prices. So, a relatively stronger dollar and a lower pace of U.S. interest rate cuts may not necessarily spell the end of yellow metal’s rally.
Shifting dynamics made gold one of the biggest surprises of the wider commodities market in 2024. It recorded persistent rises towards the end of the year, just as other metals – both precious and industrial ones – largely struggled due to lower economic growth in China.
Market chatter has now turned to whether or not gold can cap the psychological $3,000/ozt level. The yellow metal remains within touching distance of the mark. Its rise as well as investor appetite has been relentless.
Many, including Goldman Sachs and Bank of America, believe such a price level to be feasible, especially in the second half of 2025.
Of course, the macroeconomic and geopolitical climate in the first half of the year will ultimately dictate the direction of travel for gold, with many cautiously betting on an upward price trajectory for an already pricey precious metal.