In 2024, gold saw substantial growth, reaching record highs amidst global instability and shifting economic and political conditions. In this feature, Paul Williams, the Managing Director of Solomon Global, a specialist supplier of LBMA-approved gold and silver bars and coins, explores the key factors behind gold’s surge and how, in 2024, the precious metal reaffirmed its role as a trusted store of value in volatile times.
Twenty-twenty-four will go down in history as one of the most volatile on record. It is a year when many countries seemingly cut off their noses to spite their faces, with some experiencing an ousting of their governments as their reward.
In the last twelve months, the BRICS block has expanded further, raising more questions about the validity and fairness of a unipolar world. Some of the world’s best-known companies have closed their doors or are staring at an uncertain future; countries have imposed martial law, easy-to-spot propaganda has continued to rise, with truth taking a backseat under the guise of patriotism, and leading banking institutions have made it clear that they now prefer ‘black over green’.
All of the above, coupled with the ever-present gloom brought on by inflation, have contributed to a profound weakening of many Fiat currencies, prompting people to seek alternatives. Is it any wonder that gold, the only true “store of value,” has consistently hit historic highs in 2024?
For millennia, gold has proven its worth. When all around it has fallen and collapsed, it has been the one store of monetary value that can always be relied upon. Although some have tried to negate its undoubted lure through their words and perhaps even through intervention, it is once more standing front and centre on the economic landscape.
Below, Paul Williams of Solomon Global offers an insider’s perspective on what could shape gold’s future trajectory amidst ongoing global challenges.
Gold’s meteoric rise in 2024
The gold price surged by 27% in 2024, closing at $2624.49 per troy ounce on December 31st[1]. The ‘barbarous relic’ hit 39 all-time highs (dollar) over the year, representing a historic milestone and surpassing previous records set during other periods of economic and geopolitical instability. The rise was driven by a complex interplay of global factors that underscored gold’s enduring role as a safe-haven asset.
Despite the Fed halving its forecast on the size of rate cuts in 2025, the main demand or price drivers that propelled gold to record highs throughout 2024 are likely to continue this year.
Here is a look at the different factors with a little more focus.
Geopolitical tensions fuelling demand
The special military operation currently being undertaken by Russia in Ukraine, compounded by mounting tensions in the Middle East, saw investors flee to gold, which was traditionally seen as a stable store of value during times of conflict.
Sadly, there seems little hope of a diplomatic solution to the intensifying situations in Ukraine or the Middle East, and 2025 could even see an escalation.
Continued demand from central banks and emerging markets
Gold is seen as a reliable reserve asset, and many global central banks increased their gold holdings over 2024. Nations like China, Russia, and Turkey ramped up their gold reserves, seeking to reduce dependence on the US dollar amid an increased move to de-dollarisation.
This trend looks set to continue, or even increase, as more banks diversify from US treasuries and could provide further upward momentum for gold. Additionally, rising wealth in emerging markets continues to drive demand, especially during economic or political uncertainty. This strategic move by central banks underscored a broader shift in the global financial system.
Inflation and economic concerns
The global outlook remained uncertain in 2024, with inflation fears persisting in major economies. While the US Federal Reserve and other central banks made efforts to control inflation through interest rate adjustments, the impact of rising costs of living and wage pressures continued to weigh on consumer sentiment.
Gold’s traditional role as a hedge against inflation drew investors as they sought a safer alternative for preserving wealth. If economic conditions worsen in 2025, leading to a global slowdown or recession, investors will likely continue flocking to gold.
Weak economic data or slowing growth could support higher prices. The potential for a return of rising inflation will continue to influence gold’s price.
UK Perspective: a new Labour government and the pound’s volatility
The incoming Labour government’s focus on fiscal responsibility and wealth redistribution led to fears that higher CGT rates could be introduced to fund public spending. This speculation prompted a surge in purchases of legal tender gold coins, which are exempt from CGT.
The Royal Mint reported a sharp increase in demand for these coins in the third quarter of 2024, with revenues increasing by 110% from July to September 2024 (compared to the same period of 2023).
Political uncertainty also contributed to volatility in the pound. While the pound’s performance remained relatively strong early in the year, concerns about Labour’s economic policies following Rachel Reeves’ maiden budget on October 30th contributed to sterling recording its longest stretch of weekly losses in almost six years.
A weaker pound typically translates to higher gold prices for UK investors, as gold is priced in dollars. This currency dynamic meant that UK-based gold holders enjoyed amplified returns when the pound dipped against the dollar.
All-time highs, investor sentiment and gold’s continued appeal
Throughout 2024, gold prices tested new highs, reflecting broader market anxieties. The psychological threshold of $2,500 per ounce was breached in August for the first time as a combination of geopolitical events and economic uncertainty converged, and the precious metal reached its highest price ever on October 30th, when it traded for a record-breaking $2790.07. Despite a pullback from this level, investor sentiment has remained bullish.
Whilst there are potential headwinds for gold, including a more Hawkish Fed, a myriad of factors could provide further upward momentum for the metal in 2025.
Central banks look set to continue their gold-buying trajectory; the Central Bank of China – the world’s second-largest economy – resumed gold purchases in December for the first time in seven months.
The macroeconomic outlook still looks weak; geopolitical uncertainty persists, as do high global debt levels and long-term inflationary pressures. Trump’s tariffs, far from being detrimental, could support gold. The costs of tariffs, essentially taxes on imported goods, are often passed down to consumers as higher prices.
For gold investors, such policies present unique opportunities, primarily because tariffs often create economic uncertainty and inflationary pressures—two conditions under which gold historically thrives.
“2024 underscored gold’s timeless role as a safe-haven asset. In a world grappling with geopolitical conflicts and economic uncertainty, gold has provided stability and security for investors,” says Williams. “The record highs achieved this year reflect not just market conditions but also a broader sentiment of caution and hedging against risk. This context looks set to continue in 2025.”
References
[1] Data taken from https://goldprice.org/ [i] Disclaimer: This press release is for informational purposes only and does not constitute financial advice. Buying physical gold as an investment involves risk, as the value of precious metal prices can be volatile. Historical financial performance does not necessarily give a guide of future financial performance. We recommend that you conduct your own independent research and seek professional tax, legal and financial advice before making any investment decisions.
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