The gold price rises with a 27% gain in a year… but will the gold price continue its great performance in 2025?

The price of gold posted a stunning 26.6 percent gain in 2024, beating even US stocks – and is now up almost 800 percent since the new millennium.

The S&P 500 rose 23 percent last year, while the FTSE 100 lagged well behind with a return of almost 6 percent.

Gold hit a record high of $2,790 per ounce on Halloween, October 31, and was trading at $2,642 at the time of writing.

Financial experts say a stock sell-off, inflation or geopolitical shocks could trigger another rally for gold in 2025.

However, the price gains achieved in 2024 exceeded financial analysts’ forecasts, according to Adrian Ash, research director at BullionVault.

“In the first quarter of the 21st century, gold is up 797.7 percent year-to-date, outperforming all other major asset classes and shocking the consensus view that gold bullion is dead as an investment,” he says.

“At an average of $2,386 per Troy ounce this year, gold prices rose 23 percent year-on-year, instead of rising just 6.1 percent as professional analysts expected.”

In terms of current trading, Ash says investment demand in the West has remained muted, with BullionVault users continuing to benefit from gold’s advance, and inflows into gold-backed ETFs barely moving.

However, investors will likely remain alert to gold’s buying opportunities. There are many benefits to holding gold in a well-balanced portfolio.

The precious metal is a store of wealth and a hedge against inflation, a useful way to diversify and a safe haven during financial and political turmoil.

However, you need to be clear because gold does not generate income and its price can be volatile.

Its value has many drivers that can act in concert or in conflict, and can exert weaker or more dominant power at any time. See below for an overview of the factors you should pay attention to.

>How to invest in gold: Exchange traded commodities, funds and physical bars or coins

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says gold has had a “great year” and could see more gains if there is a downward correction in global stock markets.

He also adds, “Lately, the yellow metal has been under pressure from rising US Treasury yields, increasing the opportunity cost of holding non-interest-bearing gold.

“But an accelerated sell-off in global equities could drive capital to the safe metal regardless of the rise in yields.”

Emma Wall, head of platform investments at Hargreaves Lansdown, said: ‘While we don’t think it will make big gains this year, we do think it will retain its value and provide useful diversification in the face of both inflation and – unfortunately likely – persistent geopolitical shocks.’

Hargreaves’ fund research team has tipped the Troy Trojan fund (ongoing charges: 0.88 percent) for exposure to gold in 2025, noting that its managers are taking advantage of gold’s properties without putting all their eggs in one basket .

The fund is focused around four ‘pillars’: large, established companies; bonds, including US index-linked bonds; gold-related investments, including physical gold; and cash.

What moves the gold price?

The prize often ends in a tug-of-war between opposing forces. The following factors or others may have an influence. Here you can read what you should pay attention to.

Expectations of inflation and future interest rate decisions: Actions by the world’s most powerful central bank, the US Federal Reserve, matter most.

Rate cuts, or the mere anticipation of them, make gold more attractive to investors because they weaken the dollar and can fuel inflation.

A strong market consensus on what a determined Fed will do next could trump a number of opposing factors in the gold price combined.

Purchases by the central bank: Many like to hold gold and have deep pockets, although some are believed to run their operations under the radar (see below).

Mystery buyers: In recent years, there has been much speculation that secret trading activities have affected the gold price.

The main suspects are the Chinese or Russian central bank, or perhaps both.

The invasion of Ukraine led to sanctions against Russia, which has the world’s second-largest gold mining industry.

Meanwhile, there are suspicions that China is underreporting its gold reserves to central banks, possibly because it is building up a war chest against Western sanctions if it were to invade Taiwan.

The US can prevent sanctioned countries from transferring dollars through their financial system.

Less powerful countries than China or Russia might also be tempted to quietly build up gold reserves to strengthen their financial positions if they get on the wrong side of Washington and the West.

The US dollar: A strong dollar makes gold more expensive and this can deter all types of buyers and put pressure on the price.

This is because it is denominated in the US currency, so if the dollar is strong it can price out foreign buyers. Conversely, a weaker dollar could help boost gold prices.

Geopolitical events and crises: Gold is considered a safe haven in times of trouble. However, this also applies to the dollar, which can also strengthen in times of turmoil, meaning that these two trading trends sometimes counteract each other.

Physical gold purchases: The demand for coins, bars and jewelry can be seasonal. For example, the festival of Diwali is a popular time to buy gold jewelry in India, and so is the Lunar New Year in China for all types of physical gold.

Institutional investors and hedge funds play: Even if demand for physical gold is high, it may be offset by the volatility of ‘paper gold’, in the form of exchange-traded funds held by institutional players such as banks and hedge funds.