what is driving gold prices?

What is driving gold prices?

There are three key drivers of the gold price in 2024-25. Some of these trends are structural, some are more short-term.

1. Geopolitical Risk and "Risk-Off" Demand

Firstly, gold is an uncorrelated asset class meaning that it is an accessible and liquid diversifier.  It can act as a shock absorber during period of elevated geopolitical risk.  So the recent uncertainty around Trump's tariff policies and what that could do to equity markets (earnings risk) and bond markets (inflation risk), makes Gold an "risk-off" Alternative.

2. Central Bank Buying: Structural Demand from Emerging Markets

Secondly, Central Bank buying: although the Western world has reduced the amount of gold it holds in Central Banks reserves, Developing Markets - such as China, India and Russia - have been buying physical gold, such that overall, Central Bank gold reserves are on the increase.  This is has been a medium-term trend for BRICs countries to reduce their dependency on the Dollar.  This is a medium-term structural trend.

3. Gold as a Store of Value and Inflation Hedge: Debt Concerns

Finally, a store of value and inflation hedge: as markets worry about debt indigestion - the oversupply of US Government Bonds and the long-term sustainability of Western e.g. US/UK debt levels, Gold is a "real asset" that preserves value should there be any risk of devaluation of debt securities.  Gold is a "real" store of value because it also acts as an inflation hedge: whereas nominal Bonds cannot hold their real value when inflation rises, Gold tends to hold its value in real terms and has withstood inflation shocks through revolutions, wars and even back in Biblical times!  This is a long-term structural trend.

Find out more

• Watch our original CISI-endorsed CPD webinar back in 2021 with representatives from the World Gold Council anticipating these structural trends
• Gold was our Head of Research Henry Cobbe's top pick as a Valentine's Day gift in 2024: read the article here
• See all our public Gold & Precious Metals research​