The price of gold has staged an impressive rally in 2024, hitting a new all-time high of over $2,700 per ounce in October. Although the price has declined slightly since then, the precious metal continues to soar. What are the reasons for this continued strength and what is the outlook for the coming months?
A complex interplay of global factors:
The causes of the gold boom are complex and cannot be reduced to a single factor. Rather, it is a complex interplay of various global developments that have brought gold into focus as a safe haven and attractive investment alternative:
Geopolitical tensions: The global situation continues to be characterized by uncertainty. The war in Ukraine, tensions between the USA and China, China and Taiwan, Israel and its Arab neighbors, and various regional conflicts are fueling fears of escalation and driving investors into safe investments such as gold.
Inflation concerns: Inflation remains stubbornly high and is putting a strain on consumers' purchasing power. Although central banks have counteracted this with interest rate increases, energy and food prices are continuing to rise in some cases. Gold is considered a hedge against inflation and is therefore becoming more attractive in times of rising prices.
Weak US dollar: The US dollar has lost value against other currencies in recent months. This makes gold cheaper for investors outside the dollar zone and fuels demand, but this could change after the election of Donald Trump as US president.
Interest rate policy of the central banks: Although the interest rate hikes by the central banks have increased the attractiveness of bonds, real interest rates, i.e. interest less inflation, remain low. Gold, which does not pay interest but is considered a safe asset, therefore remains an attractive investment alternative.
Rising demand from Asia: Demand for gold in Asia, especially in India and China, remains high. Gold plays an important cultural role in these countries and is often used for jewelry and as an investment. The growing middle class and rising wealth in these countries are also driving demand further.
Gold price development in detail:
The gold price started 2024 at around 2,000 US dollars per ounce and climbed steadily over the course of the year. In August, the $2,500 mark was broken for the first time, in September the $2,600 mark and in October the gold price reached a new all-time high of over $2,700 per ounce. This rapid development was accompanied by temporary corrections, which, however, could not stop the upward trend.
Outlook:
What will happen to the gold price? Opinions of experts differ. Some analysts expect the upward trend to continue and see the gold price at over $2,900 per ounce by the end of 2025. Others warn of overheating of the market and expect a correction.
Factors that could influence the gold price in the coming months:
Development of the global economy: Sustained economic growth could further boost demand for gold. A recession, on the other hand, could lead to a fall in the gold price.
Inflation development: If inflation continues to rise, this should support the gold price. A decline in inflation, on the other hand, could put pressure on the price of gold.
Monetary policy of central banks: Further interest rate hikes could put pressure on the price of gold. A loosening of monetary policy, on the other hand, could support the price of gold.
Geopolitical risks: New conflicts or crises could increase demand for gold as a safe haven.
Donald Trump: The unpredictable future under President Trump is already having a strong impact on the global economy. The dollar has risen against the euro, probably due to the "America First" policy, and certain stocks, such as Tesla, have experienced strong price changes.
Development of the US dollar: A weakening of the US dollar could support the price of gold. A strengthening of the US dollar, on the other hand, could put pressure on the price of gold.
Conclusion:
Gold has proven its strength as a safe haven and protection against inflation in 2024. The ongoing geopolitical uncertainty, high inflation and low real interest rates suggest that gold will remain an attractive investment alternative in the coming months. Investors should closely monitor future developments and adjust their investment decisions accordingly. Gold should be an important part of a diversified portfolio, but of course not the only form of investment.