Key Points:
Gold has showcased exceptional performance in 2024, maintaining its allure as a safe haven in the face of economic and political tensions.
State Street Global Advisors (SSGA) highlights that the factors driving this surge are far from exhausted, pointing to continued central bank buying, strong consumer demand, and expected monetary easing in 2025.
Central banks worldwide have purchased gold aggressively, aiming to diversify reserves amid currency volatility. This trend shows no signs of slowing, with demand levels projected to remain robust throughout 2025.
Picture: Gold showed signs of easing lower as short-term momentum wanes, hovering near key support, as seen on the VT Markets app.
From the chart above, we see a mild downward drift, with buyers struggling to hold higher ground. This movement mirrors a quiet pullback that may offer traders clues on emerging sentiment shifts.
For context, global central banks acquired approximately 1,136 tonnes of gold in 2023, marking the highest levels in over 55 years. This purchasing momentum is expected to counter the drag created by a strengthening US dollar.
Conflict in the Middle East and the Black Sea, paired with a shift toward de-dollarisation among major economies, is likely to expand gold as a reserve asset.
This revelation emphasises SSGA’s projection of gold trading between $2,600 and $2,900/oz in 2025, with a bullish potential of $3,100/oz.
India and China, the world’s largest gold consumers, are pivotal to the metal’s price trajectory. India’s demand surged by 14% in Q3 2024 compared to the previous year, driven by wedding season purchases and rural income growth.
Similarly, China’s reopening post-COVID has unleashed pent-up demand, with gold jewellery sales climbing 12% year-on-year in Q4 2024. These regions collectively account for over 50% of global gold consumption, significantly influencing price trends.
With the Federal Reserve expected to implement rate cuts in mid-2025, the opportunity cost of holding gold compared to USD or Treasurys will decline. Lower interest rates historically have bolstered gold prices by making non-yielding assets more attractive.
See also: Dollar Slips as Rate Cut Bets Grow
If inflationary pressures persist due to expansive fiscal policies under the Trump administration, the appeal of gold as an inflation hedge will only grow.
A dovish monetary policy environment may create conditions for a sustained rally in gold. Traders should monitor announcements from the Federal Reserve closely, as unexpected rate cuts could trigger sharp upward movements in the metal’s price.
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