Solomon Global’s Managing Director, Paul Williams analyses the factors which impacted gold’s price surge in 2024 and examines how these might play out in 2025.
Gold saw substantial growth in 2024. Fuelled by geopolitical tensions and shifting economic and political conditions, the precious metal made gains of sterling 28% over 12 months hitting 40 all-time highs to close the year at £2,079.67 per ounce.
The rise was driven by a complex interplay of factors. Against a backdrop of global and domestic instability, gold’s timeless role as a safe-haven asset was underscored once again.
Here, Paul Williams explores the key factors and demand and price drivers that propelled gold to record highs throughout 2024 and looks at the likelihood of their continuation in 2025.
UK politics and the pound’s volatility
A new Labour government in the summer positively impacted domestic gold prices. Fears that the left-wing party would impose higher CGT rates to fund public spending led to a surge in purchases of legal tender gold coins, which are exempt from CGT. Concerns ensued about Labour’s economic policies with Rachel Reeves’ first budget on October 30th. This likely contributed to sterling recording its longest stretch of weekly losses in almost six years.
With gold priced in dollars, a weaker pound typically translates to higher gold prices for UK investors. This resulted in UK-based gold holders enjoying amplified returns when the pound lost ground to the dollar.
War, what is it good for? Nothing but gold prices
With the Russia-Ukraine conflict not abating and mounting tensions in the Middle East, global geopolitical tensions were constant headline news in 2024. This uncertainty propelled gold’s price as investors flocked to the asset, which is traditionally seen as a stable store of value during unstable times. Unfortunately, diplomatic solutions seem to be in short supply and there appears to be no end in sight to these conflicts. An escalation in 2025 would surprise few.
Central banks buying gold
Many global central banks increased their gold holdings over 2024 (gold is seen as a reliable reserve asset). China, Russia and Turkey were just a few of the major countries to expand their gold reserves amidst an increased move to de-dollarisation. Indeed, it was reported in January, 2025 that China’s Central Bank had again expanded its gold reserves and that central banks collectively had added 53 tonnes of gold to their reserves in November of 2024. This year may well see more banks diversifying from US treasuries, and this could provide a further tailwind for gold.
Economic concerns
Alongside an uncertain global outlook, inflation was a persistent theme for the major global economies during 2024. The U.S. Federal Reserve and other central banks tried to stifle inflation through interest rate adjustments. However, the impact of the rising cost of living and wage pressures continued to dampen consumer sentiment.
Gold’s traditional role as a hedge against inflation drew investors as they sought a safer alternative for preserving wealth. A worsening of economic conditions in 2025 could lead to a global slowdown or even recession. Writing in The Telegraph on January, 1st, Jeremy Warner claimed recession warning lights were already flashing for Britain in 2025. In this scenario, investors are likely to continue to head to gold. Any weak economic data or indicators of slowing growth are likely to support higher prices.
All-time highs and gold’s continued appeal
A combination of the aforementioned factors resulted in gold hitting its highest ever price level on Nov 23rd, 2024, when it traded for a record-breaking £2,171.68. It had breached its psychological threshold of £2,000 per ounce for the first time just under two months previously. Investor sentiment has remained bullish ever since.
There are many factors, which could provide further upward momentum for the precious metal in 2025. Central banks look set to continue their gold-buying path; geopolitical uncertainty persists, the macroeconomic outlook is still fragile and high global debt levels and long-term inflationary pressures are sustained. Trump’s looming tariffs could result in trade wars bringing with them further economic uncertainty and inflationary pressures, which are usually a boon for gold.
All things considered, fresh highs for gold in 2025 are certainly on the table, a sentiment shared by many analysts.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Buying physical gold as an investment involves risk, as the value of precious metal prices can be volatile. Historical financial performance does not necessarily give a guide of future financial performance. We recommend that you conduct your own independent research and seek professional tax, legal and financial advice before making any investment decisions.
