Gold Demand Surges to New Highs Amidst Escalating Tariffs and Central Bank Purchases
Central banks and investors seeking safe havens continue to drive record-breaking gold demand. Gold reached consecutive highs on Wednesday, exceeding $2,877 per ounce, with futures surpassing $2,900.
According to the World Gold Council, central banks' intense gold purchases in 2024, particularly in the fourth quarter, contributed to a new record demand of 4,974 tonnes. Concerns over inflation, geopolitical instability, and portfolio diversification motivated these purchases.
The Federal Reserve's rate cuts prompted global inflows into physical-backed gold exchange-traded funds (ETFs). A low interest rate environment favors gold as it reduces competition from yield-bearing assets. ETF demand remained stable in 2024, contrasting with the previous three years' significant outflows.
Gold has gained approximately 8% year-to-date, surpassing the S&P 500's 23.1% growth. Goldman Sachs analysts maintain their bullish outlook for gold due to structural (central bank buying) and cyclical (ETF buying) factors. They predict a $3,000 per troy ounce price in the second quarter of 2026.
Future gold demand remains contingent on US policy, including Federal Reserve rate cuts and the impact of tariffs. Central banks are expected to continue purchasing gold, while ETF inflows may increase with renewed rate cuts.