Gold prices are soaring, inching closer to the $3,000 mark. Many experts expect further gains, while some caution that certain factors could slow or even reverse the trend.
Why Is Gold Reaching Record Highs?
Gold has been a strong performer for investors. In 2023, it surged by 26%, and in 2024, it has already climbed another 12%. In late February, gold briefly touched $3,000 before pulling back slightly. On Thursday, it set a new all-time high of $2,989 per ounce, showing its continued strength.
One of the main reasons behind this rally is the aggressive gold purchases by central banks in emerging markets. After Russia’s foreign currency reserves were frozen due to its invasion of Ukraine, many countries began seeking alternatives to the U.S. dollar. Gold became the preferred choice.
Compared to Western nations, emerging market central banks still hold relatively small amounts of gold. China has allocated only 5.5% of its reserves to gold, while India holds 11.4%. In contrast, the U.S. keeps 74.9% of its reserves in gold, and Germany holds a similar percentage.
If China were to increase its gold reserves to 30–40%, it would need more gold than the total annual global production for multiple years. This rising demand has played a key role in driving gold prices higher.
Can This Rally Continue?
While most analysts believe gold prices will continue rising, some warn of risks that could slow the rally. Diego Franzin, a portfolio manager at Plenisfer Investments, points to potential geopolitical changes that might impact gold’s momentum.
A possible ceasefire in Ukraine could weaken two major drivers of gold’s rise. First, gold is a safe-haven asset during global conflicts. If tensions ease, some investors may sell their gold holdings. Second, if Russia regains access to its frozen reserves, central banks may slow their transition to gold, reducing demand.
Franzin also notes that gold faces competition from other investments. If U.S. Treasury yields rise, investors might shift money from gold to bonds. Similarly, if China’s stock market recovers, investors may move funds from gold into equities.
Despite these concerns, Franzin remains optimistic about gold’s future. “Gold is becoming a key asset in portfolios,” he says. “This trend is unlikely to reverse in 2024. In fact, it may grow stronger.”
Gold-backed exchange-traded funds (ETFs) have also seen their biggest inflows since 2022. These investments helped push gold to its latest record high before it briefly paused below $3,000.
What’s Next for Gold?
Uncertainty surrounding U.S. economic and foreign policies under President Donald Trump has further increased gold demand. Investors remain cautious, particularly about Washington’s stance on Russia’s involvement in Ukraine. Meanwhile, China’s decision to allow insurance companies to invest in gold is expected to boost demand even further.
“This policy shift will significantly increase China’s gold consumption,” says Charlotte Peuron, a fund manager at Crédit Mutuel.
Investment bank Goldman Sachs has revised its gold price forecast upwards, citing strong central bank buying. The firm now predicts gold will reach $3,100 per ounce by the end of 2024. If this happens, it will mark another year of big gains, extending gold’s 75% surge since its 2022 low of $1,650 per ounce.
With supply constraints and strong demand, gold’s upward momentum appears solid. However, investors will closely monitor geopolitical and economic events that could shape gold’s future movements.