All That Glitters – by Ramsey Crookall
Gold has recently surged to unprecedented heights, reaching a record high of US$ 3,125.35 per ounce. This remarkable rise, including a 27% gain last year, marks the most significant increase in 14 years.
Why has gold been so strong of late?
While equity markets have lost ground in recent weeks, safe-haven assets such as gold have steadily risen. Gold is traditionally viewed as a safe asset during economic uncertainty or geopolitical tensions. Recent inflation and recession concerns, influenced by President Trump’s policies, have attracted investors. Gold is considered to be a proven hedge against inflation as it is said to preserve the real value of assets when other prices rise. This is because gold’s worth remains resilient, unlike traditional fiat currencies, whose value can diminish as central banks print more money.
Another boost to prices has come from increased demand from Central Banks, notably China and India, with a keenness to diversify away from an increasingly volatile dollar.
There has also been greater use of gold exchange-traded funds and digital gold platforms. These platforms have made gold more accessible and liquid, with some of the largest funds trading millions of shares daily.
Demand for gold consists of four major components: jewellery, technology or industrial demand, investment, and central banks.
Jewellery accounts for 50% of total demand, and growth is driven by several factors, not least the growing disposable incomes and rising middle-class populations in emerging markets like China and India. Furthermore, the increasing adoption of digital channels is reshaping how customers interact with gold jewellery brands.
Gold’s inherent physical and chemical properties make it useful in many industrial and technological applications and these make up about 5% of demand. Gold, alongside other precious metals, is used in everything from smartphones to electric cars and would be used more if it were not so rare and expensive. Gold is also important in the medical field as its inherent stability and unique optical properties make it perfect for use in diagnostic testing.
Of all the precious metals, gold is the most popular as an investment, and this accounts for a further 25% of global demand. There are several reasons why people invest in gold, and its ability to maintain its value over time is one of the principal ones. For thousands of years, gold has maintained its value as money and investment, and unlike paper currencies that come and go, gold has intrinsic worth recognised across the globe. Today, investors buy gold to diversify portfolios, hedge against inflation, and protect against currency devaluation.
Central Banks account for the remaining 20% of demand, and further buying will be key to underpinning the gold price going forward. According to data from the World Gold Council, after dropping in the third quarter of 2024, central bank gold purchases accelerated towards the end of the year, adding 333 tonnes, 54% higher than the prior year. The People’s Bank of China (PBoC) also returned to gold purchases in November for the first time since April earlier that year. Central Banks are buying gold amid concerns about ongoing inflation, geopolitical tensions, and the requirement to add diversification to portfolios.
In summary, the recent surge in gold prices is driven by a combination of economic uncertainty, increased demand from Central Banks, and the growing popularity of gold as an investment. As gold continues to be a reliable hedge against inflation and currency devaluation, it remains a valuable asset for investors.
The dealing team at Ramsey Crookall are highly experienced in trading investments that provide exposure to gold and can be contacted by e-mail at dealers@ramseycrookall.com or by telephone at +44 1624 623884.
“This article is for informational purposes only and does not constitute financial advice. Should you invest, the value of your investment may rise or fall, and your capital is at risk. Investors should conduct their research or consult with an investment adviser before making any investment decisions”.