Gold is approaching a historic milestone as its price nears the $3,000 mark for the first time. After months of steady gains, the precious metal continues to attract strong demand from investors and central banks. While many experts predict further increases, some warn of possible risks that could slow its momentum.
Gold Prices Reach Record Highs
Investors holding gold have seen substantial returns. In 2023, gold gained 26%, and it has already increased another 12% in 2024. At the end of February, it briefly touched $3,000 per ounce before pulling back slightly. Even recent economic concerns in the U.S. have not slowed its rise. On Thursday, gold hit an all-time high of $2,989 per ounce.
One major reason behind this surge is the large-scale gold purchases by central banks in emerging markets. Many countries have increased their gold reserves, partly due to concerns about relying on foreign currencies. After Western nations froze Russia’s currency reserves following its invasion of Ukraine, many central banks turned to gold as a safer alternative.
Emerging markets still hold relatively low gold reserves compared to Western nations. China has 5.5% of its reserves in gold, while India holds 11.4%. In contrast, the U.S. keeps 74.9% of its reserves in gold, and Germany has a similar percentage. If China were to raise its gold holdings to 30–40% of its reserves, it would require several times the total annual gold production worldwide. This large-scale buying has provided strong support for gold prices.
Could Gold’s Rally Slow Down?
Despite the strong outlook, some analysts believe certain factors could slow gold’s climb. Diego Franzin, a portfolio manager at Plenisfer Investments, points to geopolitical risks that could impact demand. He suggests that a possible ceasefire in Ukraine might reduce two key support factors for gold.
First, gold is considered a safe-haven asset during global crises. If tensions in Ukraine ease, demand for gold as a protective investment might decline. Second, a peace deal could lead to the release of Russia’s frozen currency reserves. This might slow the trend of central banks increasing their gold holdings.
Another potential risk comes from rising U.S. Treasury yields. If bond yields become more attractive, investors may shift funds away from gold. Additionally, a sustained recovery in China’s stock market could draw capital into equities instead of gold.
Even with these potential obstacles, Franzin believes gold’s long-term upward trend will continue. “Gold is becoming a key part of investment portfolios,” he says. “We don’t expect this trend to change in 2024—if anything, it will strengthen.”
Gold-backed exchange-traded funds (ETFs) have also seen a surge in demand. Inflows into gold ETFs are at their highest levels since 2022. This increased investor interest has contributed to gold’s record-breaking performance.
Further Gains Expected
Global uncertainty continues to boost gold demand. Concerns over U.S. trade and foreign policies have fueled interest in the precious metal. Analysts point to rising fears about Washington’s position on Russia and the Ukraine conflict as key drivers of demand.
China has also introduced new policies that could push gold prices even higher. The country recently allowed insurance companies to invest in gold, a move that experts say will further increase demand. “China’s decision will have a major impact on gold demand,” says Charlotte Peuron, a fund manager at Crédit Mutuel.
Goldman Sachs has raised its gold price forecast, citing continued central bank purchases. The investment bank now predicts gold will reach $3,100 per ounce by the end of the year. If this happens, gold will have gained more than 75% since its 2022 low of $1,650 per ounce.
The Road Ahead for Gold
With strong demand and limited supply, gold appears poised for further gains. However, investors remain cautious about potential shifts in global markets. Any major changes in government policies, interest rates, or geopolitical tensions could impact gold’s trajectory.
For now, gold remains a favorite among investors looking for stability in uncertain times. As central banks continue to add to their gold reserves and global trade dynamics shift, many believe the precious metal’s rally is far from over.