Reasons Behind the Surge in Gold Prices in 2024

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Gold has been valued for centuries, not just for jewelry but also as a form of currency and an important material in manufacturing. It is well-regarded as a stable store of value.

It’s no wonder that gold prices have climbed significantly over the past few decades. In fact, gold’s price increase in 2024 has surpassed the growth of the S&P 500. This impressive rise has led many to question the factors behind gold’s ongoing bull market.

How much have gold prices risen in 2024?

In 2024, the S&P 500—a key index tracking the performance of the top 500 U.S. companies—rose by nearly 28%. However, gold outperformed this, starting the year at $2,076 and reaching $2,637 by December 19, marking a rise of over 29%.

Gold is often seen as a solid long-term investment because it typically doesn’t move in tandem with the stock market, serves as a hedge against inflation, and acts as a safe asset during economic or geopolitical instability.

While gold prices have generally increased over the years, this year’s surge is particularly noteworthy.

Why is the price of gold so high?

Gold reached record highs in 2024, and some analysts believe this upward trend will continue, with predictions like Goldman Sachs suggesting gold could hit $3,000 an ounce by 2025. Several factors contribute to this price rise:

Central bank reserves

Central banks, particularly in emerging markets, have increased their gold purchases. In response to potential sanctions similar to those imposed on Russia in 2022, countries like Russia, China, and Turkey have been boosting their gold reserves, pushing prices up.

Increased retail demand

Gold responds to demand, and it’s not just central banks buying. Retailers like Costco have started selling gold bars, with significant consumer interest. The World Gold Council has noted that such sales drive demand and could influence gold prices. In China, gold beans have become popular, further increasing demand.

Federal Reserve rate cuts

As the Federal Reserve cuts interest rates, there is an expectation that gold demand will increase. When interest rates are high, investors often prefer assets with higher yields. Gold, which doesn’t produce yield, becomes more attractive when rates decrease, leading to higher demand, especially for gold ETFs.

Concerns about U.S. debt and politics

Gold prices, typically quoted in dollars, often move inversely to the U.S. currency’s value. Investors are cautious about the U.S. economic outlook, with worries about potential recessions and political developments, such as tariffs, under President-elect Trump. These concerns drive investors towards gold, seen as a stable investment during uncertain times.

Should you invest in gold?

With gold prices near record highs, some investors are contemplating whether it’s the right time to buy. The decision to invest should align with your portfolio strategy and investment goals rather than market timing.

Gold can diversify your portfolio, maintaining value during economic uncertainty and market volatility. Before investing, consider these factors:

Storage and insurance: Physical gold requires secure storage, whether on your property, in a bank, or with a company. This often involves storage and insurance fees.

Purity: Not all gold is investment-grade. Purchase from reputable dealers and understand which gold forms are legal tender, especially if you plan to use it as a medium of exchange.

Your goals: Clearly define your investment objectives. Gold is typically seen as a diversification tool and a hedge against inflation, rather than a quick profit opportunity.

Bottom line

Gold is often viewed as a long-term store of value and a safe asset during tough times. Various factors affect its price, and in 2024, increased demand from central bank purchases and retail interest has driven its rise. Economic concerns may continue to influence gold prices in the future.