Is Gold a Good Investment: 2024 Record Highs & 2025 Outlook

Was Gold a Good Investment In 2024?

Gold had a record year in 2024, with the gold price increasing by 28% Year-to-Date in both GBP and USD. For example, if you bought gold in January 2024, the price was between £1,580 and £1,630 per ounce. By late November, the gold price reached the highest price ever achieved in Great British Pound (GBP) at £2,171.68 per ounce. According to the World Gold Council's 'Gold Outlook 2025', the average price of gold in USD in 2024 was 22% higher than in 2023. Additional research from Pro Aurum's 2024 gold review stated that gold rose by just over 35% in euros, while it recorded higher increases in Japanese yen (40%) and Canadian dollars (38%).

The US currency showed tremendous resilience in 2024, facing geopolitical tensions and inflation, and even outperformed major stock market index funds such as the DAX (DAX Performance-Index) +21%, the S&P 500 (Standard and Poor's 500) +24%, and the Dow Jones Industrial Average +16%.

Gold purchases from central banks also played a pivotal role in the rapid rise of gold prices. According to the World Gold Council, central banks reduced their net purchases from 305.2 tonnes in Q1 to 202.2 tonnes in Q2, and further to 186.2 tonnes in Q3. Additionally, Pro Aurum noted in their 2024 gold review that central banks have increased their gold reserves by 6,000 tonnes over the past ten years.

Many of the countries purchasing large amounts of gold in 2024 were members of BRICS, a group of emerging economies that aim to challenge Western dominance in global affairs. BRICS held their 16th summit in 2024, during which key members collaborated on topics such as international policies, economic cooperation, and geopolitical strategies, which were discussed throughout the duration of the summit.

How Did The Gold Price Influence Jewellery In 2024?

Gold is considered one of the world's most useful precious metals and has many applications across various industries. One of the largest markets for gold is the jewellery market, which is significantly influenced by Asian buyers. The World Gold Council highlighted in its Gold Demand Trends Q2 2024 report that global gold jewellery consumption was down 19% year-over-year (y/y) at 391 tonnes. Of this, China's gold jewellery demand was 86 tonnes in Q2, a decline of 35% y/y, marking the weakest Q2 since the 2008-09 financial crisis.

Jewellery buyers are more price-sensitive than bullion buyers, as jewellery is not solely for investment purposes, so price can be more of a factor. Therefore, the large increase in gold prices has perhaps negatively impacted the demand for gold jewellery. Additionally, the Chinese economy has likely contributed to the decline in global demand.

Key Drivers for Gold Performance in 2025

Now, let's delve into the reasons why gold has seen large increases throughout 2024 and whether it will continue to be a good investment in 2025. Goldman Sachs, an American global investment bank, has predicted that the price of gold will reach $3,000 per ounce, which, in our opinion, doesn't sound impossible after the year we just witnessed. Goldman Sachs also added that they believe the Federal Reserve will cut interest rates by over 100 basis points in 2025, with a range of 3.25%-3.5%.

As we look ahead to 2025, several factors, including economic conditions, market dynamics, regional demand, and geopolitical tensions, are poised to influence gold's performance.

Economic Factors

• US Economy: Trump's second term may boost the US economy but also bring uncertainties. The Fed is expected to cut rates by 100 basis points by year-end, which could support gold prices.
• Global Growth: Growth is expected to be below trend, with the US dollar remaining flat or slightly weakening.

Market Dynamics:

• Risk-On/Risk-Off: Early 2025 may see risk-on trades due to a pro-business agenda in the US, but potential inflationary pressures and geopolitical instability could drive demand for gold as a hedge.
• Central Banks: Continued strong demand from central banks is expected, contributing positively to gold prices.

Regional Demand:

• Asia: China and India are crucial markets. Asian demand, particularly from investors, supported gold in 2024. Economic health and trade policies will influence future demand.
• India: Economic growth above 6.5% and reduced import duties could support consumer demand for gold.

Geopolitical Tensions:

• Russia-Ukraine conflict: The conflict between Russia and Ukraine continues to escalate, with military actions intensifying and diplomatic efforts struggling to keep pace.
• Middle East conflicts: The Middle East remains a hotspot, with ongoing conflicts involving Israel, Iran, and their respective allies.
• US-China relations: Tensions between the United States and China remain high, particularly in the Indo-Pacific region

Is Gold a Good Investment For You?

It's important to establish, especially if you're new to investing or have never invested in gold, that there is a difference between investment and collectible gold. Bullion refers to precious metals that are valued for their weight and purity rather than for any collectible or numismatic value. For additional learning, we have many helpful guides, such as our guide explaining what is bullion, or our advice guide for UK investors, which can be found in our beginner's guide to gold investing.

If you've come this far and are still considering whether gold might be the right investment for you, why not contact us? Our friendly staff are available weekdays between 9:30 am and 4:00 pm and will ensure you feel confident before placing any order with us. We can help you determine if gold is the right investment for your portfolio. Additionally, you can book an appointment to meet with us in person at our Blackpool showroom or our London showroom located in Hatton Garden.