Gold has posted a remarkable 27% return in 2024, surpassing the performance of both the Nifty 50 and S&P 500 indices. The surge in gold prices is attributed to several key factors, including rising geopolitical tensions, increased demand from central banks, and a reduction in interest rates by the U.S. Federal Reserve, Moneycontrol reports.
This year has marked the strongest performance for gold since 2010, with demand for the precious metal crossing $100 billion for the first time ever during the third quarter. As 2025 approaches, analysts remain optimistic about gold’s outlook, citing continuing geopolitical uncertainties and a favorable monetary environment.
Three Key Drivers Behind Gold’s 2024 Surge
Geopolitical Risks
Ongoing geopolitical conflicts have significantly increased gold’s appeal as a safe-haven asset. Tensions in the Middle East, particularly between Israel and Iranian proxies, the ongoing Russia-Ukraine war, and the political instability following the collapse of Bashar al-Assad’s regime in Syria, have all driven investors toward gold as a hedge against uncertainty.
Central Bank Purchases
Central banks have been net buyers of gold for nearly 15 years, with this trend intensifying since 2022-23. This growing appetite for gold has further supported its price increase, as central banks continue to diversify their reserves amid global economic uncertainties.
U.S. Federal Reserve Rate Cuts
The U.S. Federal Reserve’s recent decision to cut interest rates has made gold more attractive by lowering the opportunity cost of holding bullion. The Fed’s indication that it may reduce rates further in 2025, combined with persistent inflation, is expected to sustain gold’s bullish momentum. European central banks are also expected to follow suit with similar rate cuts.
Outlook for Gold in 2025
Analysts predict that gold could continue its upward trajectory into 2025, though much will depend on the evolution of geopolitical risks. Zain Vawda, a market analyst at MarketPulse, suggested that a similar rally to 2024 could unfold, with a base price of $2,800 per ounce.
In line with this optimistic outlook, UBS has forecast gold prices to reach $2,900 per ounce by the end of 2025. Major financial institutions such as Citi, Goldman Sachs, and JPMorgan have set a target of $3,000 per ounce by December 2025, reflecting strong confidence in gold’s continued upward momentum.
As the year progresses, gold remains a focal point for investors seeking stability amid global uncertainties.
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