Gold prices have surged to unprecedented levels in 2025, driven by robust demand and a series of global economic uncertainties.
As of early February, gold futures traded on the New York Mercantile Exchange reached a record high of $2,875 per ounce, marking a significant milestone in the precious metal’s market performance.
Stable safe haven during unstable times
The surge in gold prices can be attributed to several factors. Firstly, geopolitical tensions and economic instability have prompted investors to seek safe-haven assets. Gold, with its historical reputation as a store of value, has become a preferred choice for those looking to hedge against market volatility and inflation.
Central banks
Central banks have also played a crucial role in driving up gold prices. In 2024, global central banks added a record amount of gold to their reserves, with purchases surpassing 1,000 tons for the third consecutive year.
This trend has continued into 2025, with countries like Poland, Turkey, and India leading the way in increasing their gold holdings.
Investment demand for gold has seen a significant uptick as well. Gold exchange-traded funds (ETFs) and bars and coins have experienced strong demand, particularly from investors in China and India.
The reduction of gold import duties in India and economic uncertainties in China have further fueled this demand.
Resistance?
Despite the positive momentum, analysts caution that gold prices could face resistance levels and potential pullbacks. However, the overall outlook remains bullish, with expectations of continued strong demand and further gains in the coming months.
As the global economy navigates through these uncertain times, gold’s allure as a safe-haven asset is likely to persist, making it a key player in the financial markets.
Gold price one-year chart as of 5th February 2025 (am GMT)
Gold price one-year chart as of 5th February 2025 (am GMT)
Gold has been a popular investment for centuries. The allure of gold endures in today’s varied financial environment. We will delve into the advantages and disadvantages of investing in gold, as well as the different methods by which you can incorporate this valuable metal into your investment portfolio.
Pros of investing in gold
Protection against market downturns
Gold is viewed as a safe-haven asset. In times of market crashes or economic instability, investors tend to turn to gold to protect their savings and investments. For example, during the financial crisis of 2008, the price of gold soared by more than 100%, contrasting sharply with the losses experienced by other assets.
One year gold price chart as of 26th July 2024
One year gold price chart as of 26th July 2024
Inflation hedge
As inflation increases, the purchasing power of the dollar diminishes. During periods of high inflation, gold often appreciates, offering a potential return for investors.
Diversification
Diversifying an investment portfolio across various assets can help in minimizing losses. Gold, which usually has a low correlation with stocks and bonds, can bolster diversification and diminish overall risk.
Cons of investing in gold
No income generation
In contrast to stocks, which distribute dividends, or bonds, which accrue interest and can appreciate (or depreciate) in value, gold does not produce income. It’s worth is dependent entirely on its appreciation in price.
Additional costs
Owning and storing physical gold involves various expenses. These include transportation costs, storage fees, and insurance, especially if the gold is kept at home.
Ways to invest in gold
Physical gold
You can buy gold bars or coins. Owning physical gold provides tangible ownership and is a classic tried and tested way to invest.
Gold Mining Stocks
Investing in shares of gold mining companies can be a strategic move, as these stocks are impacted by gold prices and the operational performance of the mines.
Gold Exchange-Traded Funds (ETFs)
ETFs track the price of gold. They’re an efficient way to invest without holding physical gold.
Gold mutual funds
These funds aggregate investors’ capital to invest in assets related to gold.
Options and futures contracts
For more advanced investors, trading gold options and futures can provide exposure to price movements.
Conclusion
Gold can be a valuable addition to your investment strategy, especially for long-term goals. Consider your risk tolerance, financial objectives, and the role gold plays in diversifying your portfolio. Remember that while gold has held its value over time, it’s not a guaranteed path to wealth. As with any investment, thorough research and a well-thought-out approach are essential.
U.S. gold futures rose more than 2% to trade at around $2,285
Gold prices continued their ascent, reaching a new record high on Monday 1st April 2024, driven by expectations of U.S. interest rate cuts and the metal’s status as a safe-haven asset.
Gold typically has an inverse relationship with interest rates. When interest rates decrease, gold becomes more attractive relative to fixed-income assets like bonds, which tend to offer lower returns in a low-interest-rate environment.
Gold demand hit record highs in 2023 on the back of persistent geopolitical tensions and continued weakness in some world economies, particularly China according to the World Gold Council.
Total gold demand stood at 4,899 tons in 2023 compared to 4,741 tons in 2022. Gold purchases from central banks led to last year’s surge, with purchases exceeding 1,000 tons for two consecutive years.
Prices reached an all-time high of around $2,135 an ounce in December 2023 as central banks and retail buyers increased their gold investments.
Carats at Costco
Buyers have many outlets from which to make their gold purchases. Costco recently reported selling over $100 million worth of gold bars in the final quarter of December 2023. Weird to think that we can now buy carats with carrots.
Gold bars for sale at Costco
Gold demand in 2024?
According to some analysts’ gold purchases this year are unlikely to meet 2023 levels, but a fall in inflation could prevent a drastic drop in demand.
When inflation drops significantly, consumers will start to feel ‘better-off’, and this could mitigate some of the drop in demand.
Gold carat
A Gold carat is a unit used to measure the purity of gold, with a carat representing 1/24th part of the whole.
Pure gold is 24 carats, meaning that it is 100% gold with no other metals added. However, gold used for jewellery and other applications is rarely pure, and its purity is measured in carats to determine its value.
Gold value has been slipping in recent months of 2023 – here are some of the reasons gold prices fluctuate.
Dynamic market
Gold is a precious metal that is often seen as a safe haven investment and a store of value, but it is also subject to the forces of supply and demand, as well as many other factors that affect its price.
The gold market is complex and dynamic, and the price of gold can change quickly and unpredictably. Therefore, it is important to do your own research and analysis before investing in gold or any other asset.
Always do your research! Remember, RESEARCH! RESEARCH! RESEARCH!
Gold price from 2005 – September 2023
The production costs of gold
The cost of mining, refining, and transporting gold can influence the supply and the price of gold. If the production costs are high, the gold miners may reduce their output or increase their selling price, which can affect the market balance and the gold price.
Money supply
The amount of money in circulation can affect the value of the currency and the inflation rate, which in turn can affect the demand and the price of gold. Generally, when the money supply increases, the currency value decreases and the inflation rate increases, which can boost the demand and the price of gold as a hedge.
Geopolitical stability
The political and economic events around the world can affect the market sentiment and the risk appetite of investors, which can influence the demand and the price of gold. Generally, when there is uncertainty, instability, or conflict, investors tend to seek safe-haven assets such as gold, which can increase the demand and the price of gold.
Jewellery and industrial demand
The demand for gold from the jewellery and industrial sectors can affect the market balance and the price of gold. Jewelry is the largest source of gold demand, especially in countries like India and China, where gold is culturally and traditionally valued. Industrial demand for gold comes from its use in various electronic and medical devices, such as smartphones, computers, and dentistry. The changes in the consumer preferences, the income levels, the technological innovations, and the environmental regulations can affect the demand and the price of gold from these sectors.
Gold price 3rd October 2023
Central bank actions
The actions of central banks around the world can affect the supply and the demand of gold, as well as the value of the currency and the interest rates, which can influence the price of gold. Central banks hold gold reserves as part of their foreign exchange assets, and they can buy or sell gold to diversify their portfolios, to manage their liquidity, or to intervene in the currency markets. Central banks can also affect the price of gold indirectly through their monetary policies, such as setting the interest rates, printing money, or buying bonds, which can affect the inflation expectations, the currency value, and the opportunity cost of holding gold.
Strength of the U.S. dollar
Gold is priced in U.S. dollars in most of the major trading exchanges around the world, so when the dollar rises against other currencies, gold becomes more expensive for foreign investors, reducing the demand for it. The U.S. dollar has been strengthening since, partly due to the Federal Reserve’s monetary tightening policy that has raised the interest rates and the attractiveness of U.S. Treasury securities.
Rise of global equities
Gold is often considered a hedge against inflation, currency devaluation, and the failure of other financial assets, but when the stock market is performing well, investors tend to shift their money from gold to equities, seeking higher returns and growth potential. The global stock market has been rallying since the bottom of the Covid-19 pandemic in March 2020, boosted by the roll-out of vaccines, the fiscal stimulus, and the economic recovery.
The Krugerrand
The Krugerrand is a South African coin, first minted on 3rd July 1967
Krugerrand gold coins are a type of bullion coin that were first minted in 1967 by the South African Mint. They are made of 22 karat gold and have a diameter of 32.77 mm and a thickness of 2.84mm. The obverse side features the portrait of Paul Kruger, the former president of the South African Republic, and the reverse side depicts a springbok, the national animal of South Africa. The name ‘krugerrand’ is a combination of ‘Kruger’ and ‘rand’, the currency of South Africa.
Krugerrand gold coins are popular among investors and collectors because they have a high gold content and are easy to trade. They are also legal tender in South Africa, although they do not have a fixed face value.
Decline of inflation expectations
Gold is also seen as a protection against the erosion of purchasing power caused by inflation, but when inflation expectations are low or falling, gold loses some of its appeal as an inflation hedge. The inflation expectations have been declining in recent months, partly due to the easing of supply chain disruptions, the moderation of energy prices, and the fading of the base effects from the previous year.
These are some of the main factors that have been weighing on the gold price lately, but there may be other reasons as well, such as the speculations, the market sentiments, and the geopolitical events that can influence the supply and demand of gold.
