The price of gold is rising with a gain of 27% for the year… but will it continue its stellar run in 2025?

The price of gold has risen a staggering 26.6 percent in 2024, beating even US stocks – and is now up nearly 800 percent since the new millennium.

The S&P 500 rose 23 percent last year, while the FTSE 100 lagged well behind with a return of almost 6 percent.

Gold hit an all-time high of $2,790 an ounce on Halloween, October 31, and was trading at $2,642 at the time of writing.

Financial experts say a sell-off in stocks, inflation or geopolitical shocks could trigger another rise in gold prices in 2025.

However, the price increase achieved in 2024 exceeded the predictions of financial analysts, according to Adrian Ash, director of research at BullionVault.

‘In the first quarter of the 21st century, this put gold 797.7 per cent higher than before the millennium, outperforming all other major asset classes and shocking the consensus that gold bullion has ceased to be an investment,’ he says.

‘Averaging $2,386 per troy ounce this year, the price of gold has risen 23 percent on an annual average basis, instead of rising just 6.1 percent as professional analysts had expected.’

As for current trading, Ash says western investment demand has remained muted, with BullionVault users still profiting from gold sales and inflows into gold-backed ETFs barely budging.

However, investors are likely to remain cautious about opportunities to buy gold. There are many advantages to holding gold within a well-balanced portfolio.

The precious metal is a store of wealth and a hedge against inflation, a useful means of diversification and a safe haven during financial and political disruptions.

But you have to be clear, because gold does not generate income and the price can be unstable.

Its value has many drivers that can act in concert or conflict, and have a weaker or more dominant influence at any given time. See below for an overview of the factors you should pay attention to.

>How to invest in gold: Exchange-traded commodities, assets and physical bullion or coins

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says gold has had a ‘stellar year’ and could see more gains if there is a bearish correction in global equity markets.

He also adds: ‘Recently, the yellow metal has been under pressure from rising yields on US (treasury bonds), which increase the opportunity cost of holding interest-free gold.

‘But an accelerating sell-off in global equities could drive capital into the safe-haven metal regardless of rising yields.’

Emma Wall, head of platform investments at Hargreaves Lansdown, says: ‘While we don’t think it will make big gains this year, we think it will hold its value and provide a useful diversifier in the face of inflation and – sadly likely – continued geopolitical shocks.’

The fund’s research team at Hargreaves advised the Troy Trojan fund (current fee: 0.88 per cent) for exposure to gold in 2025, noting that managers are taking advantage of gold’s attributes without putting all their eggs in one basket.

The fund is focused on four ‘pillars’ – large, established companies; bonds, including US index-linked bonds; gold-related investments, including physical gold; and cash.

What moves the price of gold?

Price often ends up in a tug of war between opposing forces. The following factors or some others may be influential – here’s what to look out for.

Inflation expectations and future decisions on interest rates: The most important are the moves of the most powerful central bank in the world, the US central bank.

A rate cut, or just the anticipation of one, makes gold more attractive to investors because it weakens the dollar and can fuel inflation.

A strong market consensus on what a determined Fed will do next may overpower a number of opposing gold price drivers combined.

Central bank purchases: Many like to hold gold and have deep pockets, although some are believed to be operating their operations under the radar – see below.

Secret shoppers: There has been much speculation in recent years that secret trading activity has affected the price of gold.

The main suspects are either the Chinese or the Russian central bank, or perhaps both.

The invasion of Ukraine led to sanctions against Russia, which has the world’s second largest gold mining industry.

Meanwhile, there are speculations that China is not reporting its gold reserves to the central bank, possibly because it is building a war chest against Western sanctions in the event of an invasion of Taiwan.

The US can prevent sanctioned countries from accounting for dollars through its financial system.

Countries less powerful than China or Russia may also be inclined to quietly build up gold reserves to shore up their financial position if they find themselves on the wrong side of Washington and the West.

US dollar: A strong dollar makes gold more expensive and this can deter all kinds of buyers and affect the price.

That’s because it’s denominated in US currency, so when the dollar is strong it can price out foreign buyers. On the other hand, a weaker dollar can help boost the price of gold.

Geopolitical events and crises: Gold is considered a safe haven in times of trouble. However, so is the dollar, which can also strengthen during periods of turmoil, so these two trade trends sometimes work against each other.

Buying physical gold: Demand for coins, bullion and jewelry, which can be seasonal. For example, the Diwali festival is a popular time to buy gold jewelery in India, as is the Lunar New Year in China for all types of physical gold.

Games of institutional investors and hedge funds: Even when demand for physical gold is high, it can be offset by the volatility of ‘paper gold’, in the form of exchange-traded assets held by institutional players such as banks and hedge funds.