Gold Shines in 2024 with 27% Gains, Bullish Outlook for 2025

Gold has emerged as the shining star of 2024, delivering an impressive 27% return for the year, outperforming major equity indices like the Nifty 50 and S&P 500. This marks its best annual performance since 2010, fueled by heightened geopolitical turmoil and increased demand from investors and central banks. As 2025 approaches, analysts project further gains, with forecasts from UBS, Citi, Goldman Sachs, and JPMorgan setting price targets of up to $3,000 per ounce by the end of next year.  

Key Drivers of Gold’s Rally in 2024

Three primary factors have contributed to gold’s stellar performance this year:  

1. Geopolitical Risks: Escalating tensions in the Middle East, including conflicts involving Israel and proxies of Iran, the war in Ukraine, and the regime change in Syria, have amplified gold’s appeal as a safe-haven asset.  

2. Central Bank Purchases: Although central bank buying has moderated compared to 2022-2023, 2024 has seen them remain net buyers, continuing a trend that began in Q2 2009. This sustained demand has significantly supported gold prices.  

3. Interest Rate Cuts: The US Federal Reserve’s rate cuts reduced the opportunity cost of holding non-yielding assets like gold, further driving its attractiveness for inflation hedging.  

Additionally, total demand for bullion exceeded $100 billion during the third quarter, marking a historic high. Gold prices also touched a record $2,788.54 per ounce on October 30, underscoring its role as a reliable store of wealth amid global uncertainties.  

Outlook for 2025  

Despite gold’s robust performance, its trajectory in 2025 will hinge on several factors:  

- US Dollar Strength: With the US dollar near two-year highs, its trajectory will significantly influence gold’s performance.  

- Monetary Policies: The US Federal Reserve and European central banks are expected to implement two rate cuts each in 2025. While this dovish stance could benefit gold, prolonged policy pauses or reversals may dampen investment demand.  

- Economic Growth: The World Gold Council (WGC) anticipates a rangebound year for gold, with potential upside if economies perform as expected. However, higher interest rates and subdued growth could pose risks.  

Market analysts have set bullish price targets, with UBS projecting gold at $2,900/oz and others estimating $3,000/oz by the end of 2025. The WGC suggests that Indian demand, supported by steady economic growth above 6.5%, will remain resilient, despite potential tariff wars under the new US administration.  

Challenges and Opportunities  

While gold remains an attractive investment, it faces competition from equities and real estate, particularly in Asia, where Chinese demand is closely tied to growth rates. India’s gold consumption appears stable, bolstered by a relatively smaller trade deficit with the US compared to other nations. However, India’s soaring trade deficit in November, which reached $37.8 billion due to a four-fold rise in gold imports, has drawn scrutiny from the Commerce Ministry and CBIC. A formal clarification on the matter is expected soon.  

Conclusion

Gold’s exceptional 2024 performance underscores its enduring value as a hedge against geopolitical and economic uncertainties. While the outlook for 2025 remains bullish, driven by supportive monetary policies and steady demand, challenges such as competition from other asset classes and fluctuating demand from major markets could impact its trajectory. For now, gold continues to shine as a beacon of stability in an unpredictable global economic landscape.