Unstoppable: Gold price shatters records as global demand surges to new heights

Earlier this week, my colleague Tom Richardson penned a wire on ASX gold miners, highlighting that they are considered ‘too cheap’ by many investors and that the attractive valuations could spark a new round of M&A activity. It is available below:

Commodities

'Too cheap': ASX gold miners on takeover watch

View

Gold mining companies are just one of the ways to play the bullion bull rush, however, and they all feed from the same trough – record-high gold prices. The surging bullion price is the prime mover, and its effects are being felt far and wide.

This week, the World Gold Council released its Q4 and Full Year 2024 Gold Demand Trends Report – which is available for download at the bottom of this wire.

Here are some of the global highlights:

• Total global gold demand (including OTC) reached a record of 4,974t - worth a record value of US$382 billion.
• For the third year in a row, central banks bought more than 1,000t of gold.
• Increased demand for gold ETFs fuelled year-on-year growth in total investment, notably in the second half as US-listed funds attracted inflows.
• Annual technology demand benefitted from continued growth in AI development and adoption.
• Gold jewellery demand fell 11% as consumers were hit by the record gold price, although the demand hit a record value of US$144 billion.

The Aussie dollar gold price rose 38% in 2024 and continues to move higher – up another 7.2% so far in 2025. So, what has driven the meteoric rise? Louise Street, Senior Markets Analyst at the World Gold Council, provided the following commentary:

“Gold once again dominated headlines in 2024, with prices reaching 40 record highs last year. Yet, the demand trajectory of 2024 was far from linear, with central banks posting strong demand in Q1 before moderating through the middle of the year and finishing with a strong Q4. 

Likewise, the second half of the year saw a notable resurgence from Western investors which, combined with remarkable growth in Asian flows, brought global gold ETF flows into positive territory in the third and fourth quarters. This was fuelled by the start of rate-cutting cycles by many central banks and heightened global uncertainties, including the US presidential election and escalating tensions in the Middle East.

"In 2025, we expect central banks to remain in the driving seat and gold ETF investors to join the fray, especially if we see lower, albeit volatile interest rates. 

Geopolitical and macroeconomic uncertainty should be prevalent themes this year, supporting demand for gold as store of wealth and hedge against risk", said Street. 

Australian trends

Australian investors played a pivotal role in the resurgence of gold demand in late 2024, driving a remarkable 20% year-on-year rebound in gold bar and coin purchases during the December quarter. 

This surge positioned Australia as the second-strongest Western market for gold investment growth, trailing only Canada. According to Shaokai Fan, Head of Asia-Pacific (ex-China) and Global Head of Central Banks at the World Gold Council, "local investors have capitalised on the strongest gold price rally on record, and continued to ‘buy the dip’ after October’s record highs."

The broader market backdrop proved highly favourable for gold, with Australian dollar-denominated gold prices surging 38% in 2024, making it the country's best-performing asset of the year. Fan expects this might continue. 

"With global conditions largely supportive of gold and the Australian dollar possibly facing pressure, we anticipate gold’s role as a high-performing diversifier in Australian investment portfolios will continue to grow in 2025," Fan concluded.

The Global X view

ETF provider Global X also has a bullish view on bullion, with Investment Analyst Justin Lin  noting that the current bull case for gold in 2025 is being driven by uncertainty and volatility. 

"The velocity at which [Trump] has announced executive orders is unprecedented, and the impact of some of these orders are often very hard to predict," Lin explains. 

This unpredictability has prompted investors to seek stability in safe-haven assets like gold. One key example is the tariff disputes involving Mexico, Canada, and China. 

"If the original plan of 25% against Mexico and Canada had gone through, the US was headed for average tariff rates of over 10.5%, the highest since the 1940s," Lin notes. While these tariffs have been delayed, the ongoing policy shifts contribute to market instability. 

"If there’s new policy changes or market swinging statements made every week, there’s little the market can do but look for safety", says Lin. 

Key drivers of gold prices

Safe-haven demand remains the dominant force behind gold’s price movements. 

"We’re currently dealing with economic uncertainty on a global scale, which means countries are also positioning for potential fallout," Lin states. 

Central banks, particularly China’s People’s Bank of China (PBOC), have been steadily increasing their gold holdings. "Last year in particular, we saw the Chinese central bank, the PBOC, purchase gold for 18 months in a row", noted Lin. 

Gold also serves as an inflation hedge and reacts to interest rate shifts. "Gold tends to go up in periods of high inflation and up again when interest rates fall," Lin explains. However, inflation and interest rates remain in flux. "Based on Powell’s comments, we may see little to no cuts this year. The markets expect we’ll have at least one rate cut by December, but the environment is dynamic", says Lin. 

For Australian investors, there could be a case for currency hedging soon should the Fed cut rates. 

"Our currency is pretty much as weak as it was during the pandemic, and the only time it was significantly weaker was during the 2000s dot com crash", notes Lin. 

On the other hand, futures markets predict the RBA will cut up to four times this year. That’s much more dovish than the Fed and could further weaken the Australian Dollar. 

"Historically, unhedged gold has outperformed hedged gold significantly over longer timeframes, so it may be worth staying unhedged until we see a meaningful reversal", says Lin. 

Portfolio Allocation

Global X advocates for gold as "the ultimate hedge against volatility—an ‘insurance policy’ that stabilises portfolios in uncertain times." 

The firm suggests investors allocate 5-10% of their portfolios to gold, adding that "allocating to the top of the range—closer to 10%—could be attractive", added Lin. 

"There’s nothing wrong with staying on the safe side and getting a bit more ‘insurance’ during uncertain times," Lin concludes. 

With persistent geopolitical and economic uncertainties, gold’s role as a portfolio staple remains crucial.

ETF

Global X Physical Gold (GOLD)

Alternative Assets

View