Bitcoin’s unrestrained rise has captured the attention of many market watchers recently, with the election of Donald Trump to the White House sending the cryptocurrency – and others like it – into tearful tears.
Bitcoin has risen nearly 50 percent since November 3 — the eve of the US election — while Dogecoin, the so-called “memecoin” that many cryptocurrency investors associate with Elon Musk, has more than doubled in the same period.
But despite cryptocurrencies dominating the vertical inch, there was another non-traditional asset class that had a sharp year: gold.
Prices of the yellow metal rose almost 28 percent in sterling terms, with investors retreating back to the traditional safe haven amid an uncertain geopolitical and economic climate.
After starting the year trading hands at £1,602 per ounce (/oz), gold hit all-time highs throughout 2024 during a bull run that peaked at £2,163 per ounce in late November before falling to £2,071 per ounce in that the time. Of writing.
Such a big jump over the course of a year would normally hasten a price comeback as investors move away from its high price. A trend that was partly evidenced by the asset class’s decline last month.
But with geopolitics set for another hectic year, and inflation looking increasingly entrenched in many Western economies, many investors in the precious metal are anticipating another year of gains in 2025.
Gold performance in 2024 (chart provided by Royal Mint)
“There’s no denying that 2024 has been a record year for gold,” says Rick Kanda, managing director of Gold Bullion Company. “It has reached massive new highs and is breaking records. This is… a result of economic uncertainty, changes in global inflation, as well as increased demand.”
Gold has traditionally performed particularly well in times of uncertainty, when investors look to allocate less of their portfolios to turbulent stock and bond markets.
The consensus view that gold carries inherent value — thanks to its practical use in jewelry and many tech products, and its historical use as currency — increases its appeal when markets are overheating.
According to Bullion Vault, a UK precious metals market, investors don’t expect the overheated environment to dissipate next year. With the volatile president-elect preparing for another term at the helm of the world’s largest economy, several major conflicts heating up in the new year, and inflationary pressures persisting, Bullion Vault investors are likely to consolidate their gold positions rather than sell out. .
The company, which regularly surveys its clients, expects gold to reach a high of $3,070 in 2025, with respondents citing geopolitics as the biggest factor driving their interest in the yellow metal.
Donald Trump’s return to the White House threatens to “upgrade global trade as well as the West’s political and military alliances,” says Adrian Ash, director of research at the exchange, adding: “Investors are taking the potential of precious metals seriously as a way to hedge against risk.”
Trump turns off the taps: sovereign debt sparks demand for gold
While the feverish outlook for international affairs was perhaps the main reason for investors to own gold in the new year, with 31.4 per cent citing it as a factor behind their decision to hold the asset, rising sovereign debt was another big driver.
Across almost all areas, Western economies have experienced a period of rising government deficits, as economic growth struggles to overcome persistent political pressures to increase government spending.
This trend dates back to the financial crisis of 2007/08, but went into overdrive during the pandemic, as leaders borrowed at unprecedented levels to keep their economies afloat while many people were unable to work.
As inflation – and then interest rates – crept in as economies opened, many government bonds – including those issued by the UK – fell to post-crisis lows, as lenders began to price in the increasing risks associated with lending to countries borrowing more and more. More money.
In a note over the summer, Bank of America analyst Michael Widmer said gold “remained the ultimate safe haven” as he expected it to reach $3,000 over the next 12 to 18 months.
The main factor in Widmer’s bullish intervention was the direction of fiscal policy in the United States and abroad. With little sign that either of the then-presidential candidates wanted to make a concerted effort to reduce the massive US deficit, and with long-term pressures for climate adaptation spending and aging populations emerging around the world, Widmer said gold was likely to retain its appeal. For investors until 2025 and beyond.
The third major factor is the rise in gold prices last year, during which we saw traditional gold bullion exceed $1 million for the first time Expanding demand from central banks; Especially those that supervise developing non-Western economies.
Largely due to the factors outlined above, a trend has emerged to phase out the dollar in many economies that have until now relied on the global reserve currency as a storehouse of some of their country’s wealth.
Chart from the World Gold Council
This discomfort with holding so many dollars, according to Michael Mahery of the Financial Metals Exchange, was exacerbated when the Biden administration chose to freeze $300 billion in Russian foreign exchange reserves in the wake of its invasion of Ukraine, and then threatened to liquidate them to help. Financing Ukraine’s recovery.
Weary of the same fate, other non-Western central banks have reassessed their commitment to dollar reserves since the beginning of the Russian invasion of Ukraine, and have bought more of the precious metal instead.
Despite a slowdown in central bank buying in the third quarter of 2024, economists at ING believe central bankers will remain “hungry for bullion” in 2025, with the Reserve Bank of India (RBI) and the National Bank of Poland leading the charge.
“Looking ahead to next year, we expect central banks to remain buyers due to geopolitical tensions and the economic climate.” analysts said in a recent note. “An April 2024 World Gold Council survey showed that 29 percent of central bank respondents intend to increase their gold reserves in the next 12 months.”
