The gold price racked up a stunning 26.6 per cent gain in 2024, beating even US stocks – and is now up nearly 800 per cent since the new millennium.
The S&P 500 rose 23 per cent last year, while the FTSE 100 lagged well behind with a return of nearly 6 per cent.
Gold hit an all-time record at $2,790 an ounce on Halloween, 31 October, and was trading at $2,642 at the time of writing.
Financial experts say a stock sell-off, inflation or geopolitical shocks could trigger another move higher for gold in 2025.
However, the price gain achieved in 2024 surpassed forecasts from financial analysts, according to Adrian Ash, director of research at BullionVault.
‘Across the first quarter of the 21st Century, that put gold 797.7 per cent higher since millennium eve, outperforming all other major asset classes and shocking the consensus view that gold bullion was finished as an investment,’ he says.
‘Averaging $2,386 per Troy ounce this year, the price of gold rose by 23 per cent on an annual average basis, rather than gaining only 6.1 per cent as professional analysts expected.’
Gold price: Investors have seen stunning gains in recent decades (Source: BullionVault)
In terms of current trading, Ash says Western investing demand has remained quiet, with BullionVault users continuing to take profit from gold’s run, and inflows to gold-backed ETFs barely moving.
However, investors are likely to remain alert to gold buying opportunities. There are many advantages to holding gold within a well-balanced portfolio.
The precious metal is a store of wealth and hedge against inflation, a useful way to diversify and a safe haven asset during financial and political upsets.
You need to be clear-eyed, though, because gold generates no income and the price can be volatile.
Its value has many drivers that can act in concert or be in conflict, and hold weaker or more dominant sway at any one time. See below for a rundown of the factors to watch.
>How to invest in gold: Exchange-traded commodities, funds and physical bars or coins
One-year gain: Gold hit an all-time record at $2,790 an ounce on Halloween, 31 October, (Source: BullionVault)
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says gold has had a ‘stellar year’ and could see more gains if there is a downside correction in global equity markets.
He also adds: ‘Lately, the yellow metal has been pressured by the rising US [Treasury bond] yields that increase the opportunity cost of holding the non-interest-bearing gold.
‘But an accelerated sell-off in global equities could drive capital into the safe-haven metal regardless of the upswing in yields.’
Emma Wall, head of platform investments at Hargreaves Lansdown, says: ‘While we don’t think it makes great gains this year, we do think it will hold its value and provide a useful diversifier in the face of both inflation and – sadly likely – continued geopolitical shocks.’
The fund research team at Hargreaves has tipped the Troy Trojan fund (ongoing charge: 0.88 per cent) for exposure to gold in 2025, noting that the managers take advantage of the attributes of gold without putting all their eggs in one basket.
The fund is focused around four ‘pillars’ – large, established companies; bonds, including US index-linked bonds; gold-related investments, including physical gold; and cash.
What moves the gold price?
The price often ends up in a tug of war between opposing forces. The following factors or others can be influential – here’s what to watch.
Expectations of inflation and future interest rate decisions: Moves by the world’s most powerful central bank, the US Federal Reserve, are the most important.
Rate cuts, or merely anticipation of them, make gold more attractive to investors as they weaken the dollar and can fuel inflation.
A strong market consensus on what a determined Fed is going to do next can trump a number of opposing drivers of the gold price combined.
Central bank purchases: Many like to hold gold and have deep pockets, though some are believed to conduct their operations under the radar – see below.
Mystery buyers: In recent years, there has been much speculation that covert trading activity has influenced the gold price.
The main suspects are the Chinese or the Russian central bank, or maybe both.
The invasion of Ukraine led to sanctions against Russia, which has the world’s second largest gold mining industry.
Meanwhile, there is conjecture that China is under-reporting its central bank gold reserves, possibly because it is building a war chest against Western sanctions should it invade Taiwan.
The US can prevent sanctioned countries clearing dollars through its financial system.
Less powerful countries than China or Russia might also be inclined to build gold reserves on the quiet to bolster their financial position should they get on the wrong side of Washington and the West.
Physical gold: Demand for jewellery, which can be seasonal, impacts the price
The US dollar: A strong dollar makes gold more expensive and this can deter all types of buyers and weigh on the price.
This is because it is denominated in the US currency, so when the dollar is strong it can price out overseas buyers. Conversely, a weaker dollar may help boost the gold price.
Geopolitical events and crises: Gold is considered a safe haven in times of trouble. However, so is the dollar, which can also strengthen during periods of turmoil, so these two trading trends sometimes work against each other.
Physical gold purchases: Demand for coins, bars and jewellery, which can be seasonal. For example, the festival of Diwali is a popular time to buy gold jewellery in India, and so is the Lunar New Year in China for all types of physical gold.
Institutional investor and hedge fund plays: Even when demand for physical gold is strong, it can be offset by volatility in ‘paper gold’, in the form of exchange-traded funds held by institutional players like banks and hedge funds.
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