Gold price looks set to continue edging higher amid soaring demand for the precious metal in the market. That’s the sentiment amid reports that demand hit record highs last year amid robust central bank purchases. Strong interest as an investment asset also offered much-needed support, and prices found support above the $2600 an ounce level.
Strong Gold Purchases
Immediate reports indicate that gold transactions rose to record highs of 4,974 tons in 2024 compared to 4,899 tons in 2023. Due mainly to gold exchange-traded funds, the total annual investment in gold increased by 25% to reach a four-year high of 1,180 tons. Strong demand from China and India helped to maintain the steady demand for gold bars and coins. The record-high transactions came as central banks and investors reacted to heightened geopolitical and economic uncertainties.
With 90 tons added to its reserves, the National Bank of Poland was the top net buyer among central banks. The second-largest net buyer of gold among central banks was the Turkish Central Bank, which increased its gold reserves by 75 tons. The third was the Reserve Bank of India, which made steady purchases throughout the year. Additionally, gold demand in India increased following the reduction of gold import duties from 15% to 6%
Meanwhile, gold demand in the jewellery industry, which has been under pressure from rising prices, was muted in 2023, with consumption declining 11% annually. This was the only exception, as other industries saw gains. Since rising prices and slow economic growth are still restraining consumer spending power, demand for gold jewellery will likely remain low in 2025.
Gold Staring at $2,900
Fast forward, the underlying fundamentals that drove gold prices to record highs in 2024 have not changed. The US threatening to kickstart an economic war at the back of trade tariffs is the latest catalyst that is fuelling demand for the precious metal that’s loved owing to its value storage credentials in times of uncertainties.
Gold powered through the $2,800 an ounce level during the week amid growing concerns of a potential trade war between the US and China that could impact economic growth. The fact that President Donald Trump has only suspended a 25% trade tariff on Mexico and Canada for a month also adds to a wave of uncertainty in the market.
“Gold continues to be largely influenced by trade uncertainties … the tariffs with China and the retaliation has the market on edge, so safe-haven flows remain the dominant factor,” said Peter Grant, vice president and senior metals strategist at Zander Metals.
Additionally, the prospect of central banks cutting interest rates to try and steer economies away from recession benefits gold. Precious metal tends to outperform at low interest rates as investors shift their attention from treasuries and bonds. Lower interest rates also lower the opportunity costs of holding gold compared to other asserts.
World Gold Council senior markets analyst, Louise Street expect gold prices to continue edging higher in 2025 as central banks remain on the driver seats on a purchasing spree to try and bolster foreign reserves. The precious metal has already powered through the $2,800 an ounce level and is on the cusp of a new record high above $2,900 an ounce.
