The momentum of rising gold prices continues to strengthen, inching closer to the $3000 mark. On February 11th, the international gold price briefly exceeded $2940 in early trading, before pulling back slightly to $2888 on the 12th.
According to Reuters, over the past two decades, the price of gold has been mainly driven by three factors: consumer demand from China and India, global central bank purchasing, and fund flows. When these three factors work together, gold prices tend to show strong upward trends.
In recent years, the most significant of the three factors supporting gold prices may be the consumer demand from China and India, accounting for over 53% of global demand combined. In 2024, China’s gold consumption demand was 815.5 tons, a 10% decrease from 2023, while India’s gold consumption demand stood at 802.8 tons, marking a 5% growth. The total consumption of these two major buyers amounted to 1,618.3 tons.
Although China and India still dominate consumer demand, their momentum has weakened in recent years, making the other two factors important drivers of current gold price increases, but both are not easily predictable.
Regarding central bank purchasing, global central bank demand has been robust over the past three years. Data from the World Gold Council shows that in 2024, global central banks’ net purchases amounted to 1,044.6 tons, slightly lower than the previous two years but still the third consecutive year exceeding 1,000 tons. This indicates that central banks worldwide continue to drive gold demand. However, central bank gold purchases are based on policy rather than market supply and demand, making them challenging to predict.
As for fund flows, they are influenced significantly by hedge fund flows and geopolitical factors.
Although gold prices have repeatedly reached new highs, attracting many investors to jump on the gold bandwagon, renowned investor and author of “The Gartman Letter,” Dennis Gartman, expressed in a recent report a somewhat dwindling enthusiasm for gold trading due to its increasing popularity.
Gartman mentioned to KITCO NEWS that though he has been bullish on gold in recent years, “recently, as gold has become increasingly popular, my passion for gold has slightly waned, and I have actually started selling some call options.”
“I still have a long-term bullish view on gold, but trading has become somewhat excessive,” he said.
Gartman had previously indicated in mid-October that a gold price pullback was imminent, advising investors to look for buying opportunities during potential consolidation periods. Following the November U.S. election, gold prices fell by over 7%, then stabilized until the recent breakout.
Gartman also pointed out the looming US-China trade war and the persistent risk of an economic downturn, stating that in the long run, these factors will continue to support the upward trend in gold prices.
Furthermore, Goldman Sachs, traditionally optimistic about gold, has rarely issued a warning on short-term gold prices. The investment bank believes that if tariff uncertainty dissipates and positions normalize, a technical downturn in gold prices is expected. Goldman Sachs estimates that gold prices could retreat to $2650.
(This article is for general informational purposes only and does not intend to provide any recommendations. Epoch Times does not offer investment, tax, legal, financial planning, real estate planning, or other personal financial advice. For specific investment matters, consult your financial advisor. Epoch Times does not bear any investment responsibility.)