Bullish Run of Gold

Does the gold bull run have further to go? An instant answer would be yes given the developments supporting the climb. After a range-driven pattern between 2020 and 2023, prices skyrocketed observing a breakout in March 2024. Subsequently, the value of the bullion moved higher with every month ultimately breaking through the $3,000 per ounce barrier on March 14. As per statistics, prices have jumped nearly 30% since January 2024. Numerous factors including geopolitical and economic uncertainty could continue to support gold’s rally till the end of 2025, although the potential for fewer rate cuts and a stronger US dollar could exert downward pressure on the prices.

At the time of this article, the price of the bullion is hovering around $3,020 per ounce. A blend of factors has come together to generate an extremely supportive environment for gold, with global instability, including the conflicts in the Middle East and Ukraine, and increased purchasing by central banks, particularly in China, India and other emerging economies, all contributing to the bullish run.

US Policy and Gold

Despite the supportive bullish environment, some potential headwinds are gathering for gold. In hindsight, gold dropped to a two-month low following the US election. A plethora of factors contributed to the decline. In the short term, equities have appeared more attractive to traders as market aficionados anticipate an upcoming period of pro-business policies including reduced tax and regulation. Simultaneously, the greenback recently hit a two-month high.

Traditionally, gold has a negative correlation with the US dollar, as an appreciating dollar makes purchases of yellow metal more expensive for overseas buyers. However, in recent times, it should be noted that this correlation has uncoupled with gold and the US dollar increasing in value last year. The greenback increased on the strength of the US economy and gold on the expectations of interest rate cuts and persistent global uncertainty.

Strengthening Global Demand

Apart from the US, purchasing trends are still expected to remain positive for gold in the upcoming months, providing further support. In the Q4 Gold Demands Trends Report, published by the World Gold Council, total gold demand increased 1% year-on-year to reach a new quarterly high and contribute to a record annual total of 4,974 metric tonnes.

Central banks around the world continued to purchase gold at a record pace with buying exceeding 1,000 tonnes for the third year in a row, accelerating sharply in Q4 to 333 metric tonnes. The annual investment reached a four-year high of 1,180 metric tonnes which was a 25% increase from Q3.

The demand in value terms also reached previously unseen levels. The mixture of record prices and volumes produced a Q4 value of $111 billion. The values took the annual numbers to reach the highest-ever value of $382 billion. In terms of supply, gold increased by 1% to reach 4,974 metric tonnes. Specifically, growth in mine production and recycling contributed to the incline in the total supply of gold.

Outlook 2025

As per the World Gold Council, central banks are expected to stay status quo with their purchasing patterns. Jewellery demand will remain under pressure and the council observes further growth in recycling. The bullion will face additional developments from around the world. The US economy with intermittent risks of overheating will bring the interest rates lower and the US dollar might decline.

The numbers on the other side of the Atlantic also present challenges. The growth of major European economies remains weak but benefits from both lower inflation and rates in the latter half of the year with additional pickup in Chinese growth could boost the exports. On Asian shores, China continues to battle weak domestic activity but could improve on stimulus measures that have observed a slight recovery in retail and property sales. India is on the way to observing the slowest growth in four years coupled with a decline in interest rates and inflation.

Gold is on the brink of a bullish run never witnessed before. The numbers and factors hint at a further climb. What’s next for gold? $4000?