KUALA LUMPUR, MALAYSIA – Media OutReach Newswire – 5 December 2024 – Gold has been valued for its stability when the financial fires are raging. That stable nature was underscored in 2024 when its price shot upward, gaining over $700 per ounce. This amounted to a 34% increase since January. The vibrant price increase has gotten traders and investors all jazzed up again about gold, with the most pressing question among them being: could gold exceed the $3,000 price point by 2025? Kar Yong Ang, a financial market analyst at Octa broker, delves into the topic.
Inflation, interest rates, and geopolitics
Inflation and interest rates influence gold prices. When inflation soars, investors tend to buy gold to protect their purchasing power. They view it as a much safer investment than stocks or bonds because stocks are prone to sudden price drops, and bonds can lose value when interest rates rise due to high inflation. Historically, though, when real interest rates (which are inflation-adjusted) have declined, gold has just soared. As some would say, ‘There is no better buy’.
By 2024, the percentage of overall reserves held in gold by central banks had reached 10%, a significant climb from the 3% level recorded just 10 years earlier. Although we are still in an era where most reserve currencies are fiat (for example, paper with little intrinsic value), an increasing number of central banks seem to believe that holding gold adds an element of prudence to their reserve diversification strategy. Emerging economies, especially in Asia, are seeing their central banks take on an increasingly important role in the gold market. China (which now holds 5% of its reserves in gold), along with India, has emerged as one of the preeminent buyers of gold.
Moreover, the central banks of the emerging economies have, since 2022, stepped up their pace of gold buying. The catalyst for this last development was the unprecedented freezing of Russian assets, which prompted multiple nations to reconsider the makeup of their reserves.
