On Wednesday, February 5th, amid a strong U.S. dollar, the price of gold continued to hit historic highs, approaching $2,900. At the same time, the World Gold Council (WGC) stated that global gold demand, including over-the-counter (OTC) trades, reached a historic high of 4,974.5 metric tons in 2024, marking a 1% increase due to rising investments.
Investors continued to seek safe-haven assets amidst the uncertainty of the U.S.-China trade war. By 1:59 PM Eastern Time on Wednesday, spot gold rose by 0.8% to $2,865.61 per ounce, earlier hitting a peak of $2,882.16, also a record high.
U.S. gold futures closed 0.6% higher at $2,893 per ounce.
Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, mentioned that gold is significantly impacted by trade uncertainties. The market remains uneasy due to tariffs on China and retaliations from Beijing, hence safe-haven flows continue to play a crucial role in gold’s performance.
So far this year, gold prices have surged by approximately 8.5%, hovering just below $2,900 per ounce.
The continuous ascent of gold prices is somewhat unusual given the strengthening dollar. Frank Watson, a market analyst at Kinesis Money, explained that a rising U.S. dollar typically works against dollar-denominated gold prices. However, amidst uncertainties regarding the impact of anticipated U.S. trade tariffs on the economy and inflation, the attractiveness of gold as a hedge remains strong against the usual effects of a robust dollar.
Silver prices have also been on the rise this year, surging by around 14%. Alex Ebkarian, Chief Operating Officer of Allegiance Gold, highlighted that due to market uncertainties, prices of both metals are likely to keep climbing.
“In high-risk environments, the appeal of physical gold and silver becomes more noticeable as they eliminate counterparty risk and provide a reliable store of value,” he stated.
Ebkarian added that JPMorgan recently launched gold futures valued at around $4 billion, likely as a hedge against potential trade disruptions.
By 1:59 PM on Wednesday, spot silver climbed by 0.8% to $32.36 per ounce, platinum rose by 1.8% to $980.95, and palladium increased by 0.3% to $990.75.
How high can gold prices rise? Michael Arone, Chief Investment Strategist for SPDR at State Street Global Advisors, believes that given global dynamics, gold prices may breach $3,000 per ounce at some point this year.
Louise Street, Senior Market Analyst at WGC, also mentioned, “By 2025, we anticipate central banks globally will continue to dominate, with gold ETF investors stepping up, especially if we see rate cuts with heightened volatility.”
“Geopolitical and macroeconomic uncertainties are likely to be the prevailing themes this year, underpinning the demand for gold as a wealth store and risk hedge,” she stated.
Gold prices spiked 27% last year, marking the largest increase since 2010, as investors turned to gold to hedge global risks amid significant interest rate cuts by the Federal Reserve.
Central banks stand as the main drivers of gold demand. In 2024, for the third consecutive year, central banks bought over 1,000 metric tons of gold. The WGC reported that the National Bank of Poland emerged as the largest gold buyer, increasing its gold reserves by 90 tons.
The WGC, an industry organization composed of global gold miners, calculated that in the final quarter of 2024, central bank purchases surged by 54% year-on-year, reaching 333 tons, promising a bright outlook for gold in 2025.
Last year, gold investment demand soared by 25%, reaching 1,180 tons, marking a four-year high. This was mainly due to a first-time depletion of funds in physically backed gold exchange-traded funds (ETFs). This shift signifies a significant change in investor interests, with a 10% increase in gold bar investments while gold coin purchases decreased by 31%.
The WGC noted that central banks and ETF investors are likely to drive demand, with economic uncertainties supporting gold as a tool to hedge against risks.