Gold experienced a remarkable rally in 2024, surging by 27.47% to close the year at $2,641 per ounce on the nearby COMEX futures contract. The bullish trend has continued into 2025, with gold now approaching the psychological milestone of $3,000 per ounce. As the price edges higher, experts are turning their attention to the next possible upside targets.
In a January 23, 2025, article for Barchart, it was noted that gold remains the ultimate reserve currency, with central banks and governments continuing to bolster their reserves. While the $3,000 mark is symbolic, the next significant goal is surpassing the inflation-adjusted high of $875 per ounce achieved in 1980.
Gold’s Continued Rally and Tightening Market Conditions
COMEX gold futures for April delivery finished 2024 at $2,666 per ounce. By February 24, 2025, the price had peaked at $2,974 per ounce, showcasing an almost uninterrupted upward movement.
The dynamics of the global gold market have shifted, with tensions surrounding tariff threats and the uncertainty regarding their impact on U.S. gold flows driving a noticeable price differential. The London gold market, which is the hub for international gold trading, deals in 400-ounce bars worth $1,180,000 at $2,900 per ounce. Meanwhile, the COMEX exchange, which uses 100-ounce bars valued at $290,000, has seen increased shipments of gold from London to the U.S. due to concerns over potential tariff disruptions. The resulting differential, known as the Exchange for Physical (EFP), reflects the gold price disparity between the two markets and has caused a tightening of the market, putting upward pressure on prices.
Gold’s Inflation-Adjusted Target: Breaking the 1980 Record
The current bull market for gold began long before the recent tightness, but the market conditions have only intensified the upward momentum. In 1980, gold reached a peak of $875 per ounce, a record that remained unchallenged until 2008. However, adjusted for inflation, $875 in 1980 is now equivalent to approximately $3,331 in 2024, with the value expected to be slightly higher in 2025. To set a new all-time high, gold must surpass this inflation-adjusted level, a possibility that could materialize in the near future.
Opportunities in Price Weakness: A Time-Tested Strategy
While gold’s upward trend remains intact, history shows that even the most aggressive bull markets experience pullbacks. Looking at COMEX gold futures dating back to 1974, gold has encountered multiple retracements, with the most significant pullbacks occurring since the start of the current bull market in 1999.
Over the years, buying gold on price dips has proven to be the most optimal strategy. However, investors who have bought near market highs, as seen in 1980, 2011, 2020, and 2022, have faced substantial corrections. As a result, while the long-term outlook for gold remains positive, buying during periods of price weakness allows for better positioning, especially with the risk of pullbacks.
The Impact of the U.S. Dollar and Interest Rates on Gold
As central banks continue to expand their gold reserves, attention will inevitably turn to macroeconomic factors that influence gold prices, such as the U.S. dollar and interest rates. Historically, a weaker dollar and lower interest rates have supported higher gold prices. Interestingly, despite a stronger dollar and rising interest rates in recent months, gold has largely ignored these factors. The rise in interest rates, driven by inflation concerns, has actually been a supportive force for gold, which traditionally performs well during inflationary periods.
Investment Opportunities: GLD as the Preferred Gold ETF
Gold’s upward trajectory remains intact as we enter March 2025. The most straightforward way for investors to gain exposure to gold is through the physical market for bars and coins, although COMEX gold futures offer an additional route for those seeking delivery. Among the many gold-related exchange-traded funds (ETFs) and exchange-traded notes (ETNs) available, the Gold SPDR (GLD) remains the most liquid and widely traded option.
At a price of $266.58 per share, GLD has over $82.55 billion in assets under management, with an average daily trading volume exceeding 9.12 million shares. The ETF holds physical gold bullion, with associated storage and insurance costs, while its 0.40% management fee covers administrative expenses.
Conclusion
Gold is poised to break the inflation-adjusted 1980 high of $3,300 per ounce, with the potential for further gains in the coming weeks and months. However, investors should be prepared for market fluctuations along the way. Historically, buying during price corrections has been the most effective strategy, and this trend is likely to continue. Those looking to add to their positions in gold would benefit from waiting for price weakness, maintaining flexibility for potential deeper declines.
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