Why Gold Prices Skyrocketed in 2024
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For centuries, gold has been a standard for value. It’s used for jewelry and as a medium of exchange. Gold is also useful in manufacturing and is seen as a store of value.
It’s no real surprise that gold prices have risen over the last few decades. In fact, gold's price increase has outpaced the growth of the S&P 500 in 2024. The precious metal’s tremendous price change has caused some people to wonder what is behind gold’s current bull market.
How much have gold prices risen in 2024?
The price of the S&P 500 — the index that tracks the performance of 500 leading companies in the U.S. — has increased nearly 28% in 2024. And while that's impressive, gold's performance has outpaced the benchmark index. At the beginning of 2024, the price of gold was $2,076. As of Dec. 19, it is $2,637 — an increase of more than 29%.
Experts have long viewed gold as an attractive long-term investment since it is typically uncorrelated with the stock market, is a hedge against inflation and serves as a safe-haven asset in times of economic or geopolitical unrest.
However, though gold's price has increased steadily over the past few decades, its skyrocketing price this year is unusual.
Why is the price of gold so high?
Although gold's price reached record highs in 2024, there's no sign that its growth will slow. In fact, some experts believe that its astronomical climb will continue. Goldman Sachs research suggests that gold could reach $3,000 an ounce in 2025.
But, what's driving the price upward trend? There are several factors that caused gold to rise in 2024:
Central bank reserves
Central banks in emerging markets have been buying more gold. Concerned about potential sanctions in the wake of those placed on Russia in 2022, some countries are stocking up on gold.
This demand for gold in countries like Russia, China and Turkey — where gold has traditionally represented a lower percentage of reserves — has helped stoke prices.
Increased retail demand
Like other assets, gold responds to demand. And it’s not just central banks. Costco recently started selling one-ounce gold bars, and the company has seen inventories depleted. Analysis from the World Gold Council indicates that Costco’s sales have impacted demand and could be impacting the price of gold, as well.
In China, gold beans are all the rage, with young adults buying them in droves. When people feel like they have easy access to gold through a retailer like Costco or a local store, it can increase demand, driving up prices.
Federal Reserve rate cuts
There has been the expectation that gold will be in greater demand as the Federal Reserve cuts interest rates. Some of that concerns the theory that while rates were high, money flowed into assets with higher yields.
Gold doesn’t produce yield. So as interest rates fall, some expect money to flow into gold. Demand for gold ETFs is especially expected by some analysts, like those at Goldman Sachs.
Concerns about U.S. debt and politics
Gold prices are usually expressed in dollars and often move inversely to the value of the U.S. currency. Investors have expressed caution about the economic future of the U.S., with ongoing concerns about recessions or President-elect Trump’s agenda, specifically regarding tariffs, driving worries.
Those concerned about the U.S. economy tend to invest in gold because its price usually remains steady during market fluctuations. Gold is often considered a stable way to invest in a tangible asset, so it becomes popular in times of uncertainty.
Should you invest in gold?
With gold near record highs, some investors are trying to decide if now is the time to buy. Whether or not you invest in gold has less to do with trying to time the market and more to do with your individual portfolio strategy and goals.
For some, gold can add a layer of diversity to a portfolio. After all, the precious metal tends to hold its value during economic uncertainty and market volatility. However, before deciding to move forward, it’s important to consider the following:
- Storage and insurance: If you buy physical gold, you need a safe place to store it. You can do that on your own property, at a bank or by using a company. Depending on the situation, you might have to pay fees for storage, as well as insurance to protect against theft.
- Purity: Not all gold is considered investment grade. Make sure you purchase your gold from a reputable dealer. Additionally, understand which gold is considered legal tender. If you expect your gold to be used as a medium of exchange, you need to know what can be used as payment.
- Your goals: What are your objectives in investing in gold? It’s not usually considered a way to make money quickly and is often seen as diversifying your portfolio and potentially hedging against inflation. Be clear about your goals and how much of your portfolio should be dedicated to gold.
Bottom line
Gold is generally seen as a long-term store of value and a safe-haven asset when times get tough. However, like other assets, several factors affect its price. In 2024, demand has been driven by central bank-buying and elevated retail interest. Other factors, like economic concerns, might drive the price higher in the future.
