Gold has soared to unprecedented heights in sterling terms, reaching a record-breaking £2,228.26 per troy ounce today, January 16th, 2025 (and is continues to climb!). This is a remarkable 41% increase from its January 2024 low of £1,580.63.
This surge underscores the asset’s enduring appeal amid a mix of global economic pressures and UK-specific challenges. Within the past year, gold has gained £647.63 per troy ounce. Here we look at what some of those drivers are…
Global Drivers: Economic Uncertainty, Geopolitical Tensions and Inflation
Globally, gold’s rise can be attributed to a combination of factors. Economic slowdowns, geopolitical tensions, and fears of sustained inflation have caused investors to flock to the precious metal as a safe-haven asset. According to a recent survey by the German ifo Institute and Swiss Economic Policy Institute, global inflation is expected to remain high until at least 2028, further enhancing gold’s appeal.
Adding to this is the trend of central banks increasing their gold reserves, further underpinning demand and contributing to higher prices.
UK-Specific Factors Behind Gold’s Surge
The record-breaking performance of gold in GBP terms is also closely tied to the challenges faced by the UK economy:
- Sterling Weakness
The pound has lost ground against the US dollar due to persistent inflation and concerns over the UK’s economic outlook. Anticipation of the introduction of tariffs by the incoming Trump administration has likely added to these pressures. Since gold is priced in US dollars, a weaker pound drives up the cost of gold in GBP terms.
- Inflation and Interest Rates
While a recent modest decline in UK inflation has eased immediate concerns, long-term inflation expectations remain raised. Many investors continue to view gold as a hedge against price pressures. On the flipside, softer inflation figures provide a potential pathway for the Bank of England to reduce interest rates. Lower interest rates make gold—a non-yielding asset—more attractive.
- Economic Uncertainty
The UK economy faces ongoing challenges, including sluggish growth prospects and fiscal pressures from the autumn budget. This is leaving many investors wary about the future. Amid these concerns, gold has emerged as a reliable option for preserving wealth.
- Strong Retail Demand
Gold’s reputation as a ‘store of value’ has fuelled strong demand among UK retail investors, particularly as rising living costs erode returns from traditional savings options.
Golden Insights
Paul Williams, Managing Director at Solomon Global, commented on the historic milestone:
What’s Next for Gold?
As 2025 unfolds, the factors that propelled gold’s historic rise in 2024 remain firmly in place. Inflationary pressures and geopolitical and economic uncertainty continue to drive investor interest, reinforcing gold’s role as a timeless and stable asset.
Read more here: Gold’s Record Highs of 2024 Set the Stage for Another Strong Year in 2025
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.
