The price of gold soars with a 27% gain in one year… but will its stellar streak continue in 2025?

The price of gold racked up a staggering 26.6 percent gain in 2024, outperforming even U.S. stocks, and is now up nearly 800 percent since the new millennium.

The S&P 500 rose 23 per cent last year, while the FTSE 100 lagged far behind with a return of almost 6 per cent.

Gold hit an all-time high of $2,790 an ounce on Halloween, October 31, and was trading at $2,642 at the time of writing.

Financial experts say a stock sell-off, inflation or geopolitical shocks could trigger another bullish move for gold in 2025.

However, the price increase achieved in 2024 exceeded the forecasts of financial analysts, according to Adrian Ash, director of research at BullionVault.

“Through the first quarter of the 21st century, this puts gold 797.7 percent higher since the eve of the millennium, outperforming all other major asset classes and shaking up the consensus view that gold bullion was finishes as an investment,” he says.

“Averaging $2,386 per troy ounce this year, the price of gold rose 23 percent on an annual average, instead of gaining just 6.1 percent as professional analysts expected.”

In terms of current trading, Ash says Western investment demand has remained quiet, BullionVault users continue to profit from the gold rush and inflows into gold-backed ETFs are barely moving.

However, investors are likely to remain on the lookout for gold buying opportunities. There are many advantages to holding gold within a well-balanced portfolio.

The precious metal is a store of wealth and a hedge against inflation, a useful way to diversify, and a safe haven asset during financial and political upheavals.

However, you have to be clear-eyed, because gold does not generate income and the price can be volatile.

Its value has many factors that can act in concert or conflict, and have a weaker or more dominant influence at any time. See below for a summary of factors to consider.

>How to invest in gold: Exchange-traded commodities, funds, and physical bars or currencies

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says gold has had a “stellar year” and could post further gains if there is a downward correction in global stock markets.

He also adds: ‘Lately, the yellow metal has come under pressure from rising US (Treasury) yields which increase the opportunity cost of holding non-interest bearing gold.

“But an accelerated sell-off in global equities could drive capital into the safe-haven metal, regardless of rising yields.”

Emma Wall, platform investment director at Hargreaves Lansdown, says: “While we don’t think it will make huge gains this year, we do think it will hold its value and provide a useful diversifier against inflation and – sadly likely – continued geopolitical crises. ‘

Hargreaves’ fund research team has backed the Troy Trojan fund’s gold exposure (ongoing charges: 0.88%) in 2025, noting that managers are taking advantage of gold’s attributes without putting all their eggs in one basket.

The fund focuses on four “pillars”: large, established companies; bonds, including US indexed bonds; gold-related investments, including physical gold; and cash.

What moves the price of gold?

Price often ends in a tug of war between opposing forces. The following or other factors may play a role: Here’s what you need to keep in mind.

Inflation expectations and future interest rate decisions: The measures adopted by the most powerful central bank in the world, the United States Federal Reserve, are the most important.

Rate cuts, or simply the anticipation of them, make gold more attractive to investors as they weaken the dollar and can fuel inflation.

A strong market consensus on what a given Fed is going to do next can outweigh a number of opposing gold price drivers combined.

Central bank purchases: Many like to own gold and have a lot of money, although some are believed to carry out their operations under the radar (see below).

Mystery shoppers: In recent years, there has been much speculation that covert trading activity may have influenced the price of gold.

The main suspects are the Chinese or Russian central bank, or perhaps both.

The invasion of Ukraine triggered sanctions against Russia, which has the world’s second-largest gold mining industry.

Meanwhile, there is speculation that China is underestimating its central bank’s gold reserves, possibly because it is building up a war chest against Western sanctions in case it invades Taiwan.

The United States can prevent sanctioned countries from liquidating dollars through its financial system.

Countries less powerful than China or Russia might also be inclined to quietly build up gold reserves to shore up their financial position in case they get on the wrong side of Washington and the West.

The US dollar: A strong dollar makes gold more expensive and this can deter all types of buyers and affect the price.

This is because it is denominated in US currency, so when the dollar is strong it can discount foreign buyers. Conversely, a weaker dollar can help boost the price of gold.

Geopolitical events and crises: Gold is considered a safe haven in times of trouble. However, so is the dollar, which can also strengthen during periods of turbulence, so these two trading trends sometimes work against each other.

Physical gold purchases: Demand for coins, bars and jewelry, which may be seasonal. For example, the Diwali festival is a popular time to buy gold jewelry in India, as is the Lunar New Year in China for all types of physical gold.

Plays by institutional investors and hedge funds: Even when demand for physical gold is strong, it can be offset by the volatility of “paper gold,” in the form of exchange-traded funds held by institutional players such as banks and hedge funds.