Gold prices experienced a sharp decline following the U.S. elections due to rising inflation concerns and a sharply strengthening U.S. dollar. However, despite the strong dollar, safe-haven demand driven by economic and geopolitical risks continued to push gold prices higher, closing 2024 with a remarkable 27.3% gain.
The primary driver of rising gold demand in 2024 was investment demand. In the fourth quarter, investment demand surged by 32% y-o-y, highlighting the safe-haven appeal triggered by Donald Trump's policies. Investment demand accounted for 25.9% of total global gold demand.
Meanwhile, central banks made up 22.9% of global demand, while the technology sector's gold demand stood at 7.2%.
The jewelry sector remained the largest driver of global gold demand, holding a 44% share. However, record-high prices, economic pressures, and weak consumer sentiment weighed on jewelry demand throughout the year, leading to a 11% decline compared to the previous year.
As the new year unfolds, President Donald Trump's trade policies and their potential impact on the global economy continue to fuel uncertainty. Gold, as a store of value, is benefiting from safe-haven demand amid these uncertainties. Since the start of the year, it has risen by over 10%, surpassing $2,940 per ounce and setting a new all-time high.
With gold just a step away from the $3,000 mark, traders are assessing whether the rally can continue. Global markets are grappling with multiple uncertainties, and in such an environment, gold prices are being driven by a complex mix of factors.
Resilient Gold Demand: Central Banks Continues to Stockpile
Despite record-high prices in 2024, central banks remained a key driver of gold demand. For the third consecutive year, central bank purchases exceeded 1,000 tons, adding 1,045 tons to global gold reserves in 2024.
Having purchased 307, 211, and 194 tons of gold in the first three quarters, respectively, central banks significantly ramped up their purchases in the fourth quarter, reaching 333 tons.
A substantial portion of this demand was driven by central banks in emerging markets. This move likely reflected preparations for global turbulence and economic uncertainties ahead of Donald Trump's inauguration.
Gold Investment Demand Hits Four-Year High
Another major force behind gold prices was investor demand. In 2024, investment demand for gold surged by 25%, marking the strongest annual increase since 2020. Total investment demand reached a four-year high of 1,180 tons, a modest rise from the previous decade's average of 1,073 tons.
Bullion and coin investors took advantage of the price drop in November, leading to a 20% increase in demand during the fourth quarter.
Investment demand from China and India accounted for approximately half of global investment demand, holding 49.8% share. China's bullion and coin investment reached its highest level in over a decade, while India's demand hit its highest level since 2013.
Another significant factor supporting this rise was the end of three consecutive years of net outflows from gold-backed ETFs. While U.S. ETF funds attracted inflows, investments in India and China helped offset declines in Europe.
These inflows were supported by interest rate cuts, geopolitical risks, uncertainty, and gold's strong performance.
AI Boom Drives Gold Demand in Technology Sector
In 2024, gold demand from the technology sector also contributed to global demand. Annual demand increased by 7%, reaching 21 tons. This growth was largely driven by the expansion of artificial intelligence (AI) adoption.
Gold Jewelry Demand Plunges to 15-Year Low Amid High Prices
Jewelry demand was the weakest link in gold demand in 2024. Annual consumption declined by 11%, falling to 1,877 tons—the lowest level since 2009. The primary reason for this drop was high prices, which limited consumer purchases to smaller quantities. However, jewelry spending still increased by 9%, reaching $144 billion.
China was the biggest contributor to the decline, with a 24% drop in demand. For the second time in three years, China ceded its position as the world's largest jewelry market to India.
India's jewelry demand accelerated towards the end of the year, reaching 563 tons annually, supported by import tax cuts, festivals, and weddings. However, this still marked a 2% decline compared to the previous year.
Looking Ahead: Gold's 2025 Outlook in a Volatile Economic Landscape
2025 has begun with heightened global uncertainties, continuing to weigh on financial markets. President Donald Trump's trade policies remain unpredictable—he imposed much lower tariffs on China than he had promised during his campaign, postponed tariffs on Mexico and Canada at the last minute, and introduced global tariffs on certain metals this week. Meanwhile, the European Union and Japan are also facing tariff threats.
The uncertainty surrounding which countries will be targeted with tariffs and when they will be imposed complicates the global economic outlook, prompting traders to seek refuge in gold as a store of value. According to the World Gold Council, given this environment of uncertainty, both investors and central banks are expected to continue demanding gold in 2025.
In China, the yuan is weakening, but stock and real estate markets are showing some signs of recovery. A weaker local currency supports investment demand for gold, while recoveries in other asset classes could provide alternatives and dampen investment demand. Nevertheless, China's investment demand is expected to remain resilient.
Similarly, India's investment demand is projected to remain strong in 2025 across both bullion and coin purchases as well as ETFs.
In the West, economic stagnation in Europe, easing inflation concerns, and declining geopolitical risks could continue to weigh on gold demand. In the U.S., however, economic uncertainty and inflation concerns may continue to drive investment flows into gold, despite expectations of persistently high interest rates.
On the other hand, while rising gold prices encourage investment demand, record-high prices could suppress jewelry demand if they persist. In India, a rebound in gold jewelry demand is expected due to the wedding season that began in mid-January.
However, considering the slowdown in economic growth, price stability will be crucial to sustaining jewelry demand. In 2024, India accounted for 30% of total global jewelry demand.
Meanwhile, in China, jewelry demand is likely to remain weak due to tariff threats, slowing economic growth, and low consumer sentiment. China's declining demand is critical for global gold consumption, as despite record declines in 2024, the country still accounted for more than a quarter of global jewelry demand.
Central banks are likely to continue increasing gold reserves due to ongoing global uncertainties. However, a strong U.S. dollar—especially as it pressures currencies in countries facing tariff threats—could prompt central banks to sell reserves to support their local currencies, potentially limiting net gold purchases.
In conclusion, gold is expected to continue benefiting from safe-haven demand driven by global economic uncertainties. However, record-high prices pose a risk to jewelry demand, while rising inflation risks could prompt central banks to slow the pace of monetary easing, creating potential headwinds for gold demand.
As a result, the outlook for the gold market will depend on gaining further clarity on the potential impacts of Donald Trump's trade policies on the global economy—something that will unfold over time.
Conclusion
As we look ahead to 2025, the outlook for gold remains bullish, albeit with some caution. The ongoing unpredictability of global trade policies, particularly those of the Trump administration, coupled with inflationary pressures and currency fluctuations, will likely keep gold in the spotlight as a store of value.
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