Gold Demand Surges to New Records as Central Banks and Investors Seek Safe Haven
Gold demand is reaching new heights, propelled by increased purchases from central banks and investors seeking a haven from escalating tariffs. On Wednesday, gold hit record highs for the fifth consecutive day, exceeding $2,877 per ounce in trading, as futures also climbed to new peaks above $2,900.
Central Banks' Record Gold Purchases
Central banks have been accumulating gold at an unprecedented pace, particularly in the fourth quarter of 2024, according to the World Gold Council. This surge is driven by concerns about inflation, geopolitical tensions, and the need for portfolio diversification.
Interest Rate Impact on Gold Demand
The Federal Reserve's rate-cutting cycle has stimulated global inflows into gold exchange-traded funds (ETFs), particularly among Western investors. Lower interest rates favor gold as it faces less competition from yield-bearing assets.
Gold's Strong Performance
Gold has gained approximately 8% year-to-date and over 27% in 2024, outperforming the S&P 500's 23.1% gain. Goldman Sachs analysts remain bullish on the precious metal, citing continued demand from central banks and ETFs, and project a target price of $3,000 per troy ounce by the second quarter of 2026.
Tariff Impact on Gold Demand
While US tariffs on Mexico and Canada have been delayed, the imposition of 10% tariffs on Chinese imports is expected to influence gold demand in 2025. According to the World Gold Council, US policy, including rate cuts, will play a significant role in determining future gold demand.
Gold remains a sought-after asset as investors seek protection against economic uncertainties. With central banks maintaining their purchasing appetite and Western investors embracing ETFs, gold is poised to continue its bull run.