Gold's 2024 Surge: A Confluence of Fear, Strategy, and Cycles 🔑

The Sunday Essay ☕️

Gold's 2024 Surge: A Confluence of Fear, Strategy, and Cycles

Gold, a unique asset in financial markets, is often misunderstood. It's dismissed by some as a relic of the past and embraced by others as a safe haven. In 2024, gold gained 27%, outperforming the S&P 500’s 25% rise. As we move into 2025, gold carries a mix of momentum, geopolitical relevance, and monetary policy alignment—all of which raises the question: where will the price go next?

Momentum: The Statistical Edge

Gold’s 2024 surge wasn’t an isolated event. Historical patterns reveal that gold often builds on strong annual performances. In five of the past six years when gold prices rose by at least 20%, they continued to rise the following year, with an average gain of 15%.

But patterns are not guarantees. The one exception to this trend occurred in 2021, when gold fell after a strong 2020 performance. This exception highlights the fragility of momentum as an investment thesis. While historical data provides insight, it does not immunize gold from the unpredictability of global markets.

Geopolitical Uncertainty and Strategic Demand

Gold’s enduring strength lies in its dual role as a financial hedge and a strategic asset. 2024 was marked by wars in Ukraine and the Middle East, alongside heightened trade tensions as President-elect Donald Trump signalled a return to confrontational policies with China. These conditions amplified the demand for gold as a hedge against uncertainty.

The geopolitical drivers of gold’s value extend beyond individual investors. Central banks, particularly those in emerging markets, are using gold to reduce reliance on dollar-based assets. Sanctions against Russia following its 2022 invasion of Ukraine served as a turning point, prompting many nations to reevaluate their reserve strategies. The shift is significant: central banks now see gold not just as a hedge but as a form of monetary sovereignty.

China, for instance, has tripled its gold reserves since 2008, driven by economic pragmatism and strategic intent. Western analysts, including those at Goldman Sachs, have noted this: the growth in central-bank gold buying reflects a rethinking of what constitutes a “risk-free” asset.

In a 2024 poll of global central bankers conducted by the World Gold Council, 29% said they intended to increase their gold holdings in the coming year.

The Absence of Industrial Drag

One factor that distinguishes gold from other commodities is its minimal reliance on industrial demand. Precious metals like silver and platinum are vulnerable to economic downturns, as their prices are heavily tied to industrial usage. Gold, by contrast, derives its value primarily from its role as a store of wealth.

This characteristic insulates gold from the pressures of global economic slowdowns or trade disruptions. While a trade war with China might suppress demand for industrial metals, gold’s demand remains largely unaffected. Instead, it is buoyed by its unique position as an asset that transcends immediate utility.

Interest Rates and the Opportunity Cost

Gold’s relationship with interest rates is central to its narrative. As an asset that yields nothing—no dividends, no interest—it thrives when the opportunity cost, or the cost of waiting, diminishes. In 2024, the Federal Reserve’s pivot to rate cuts bolstered gold’s appeal, making it a logical alternative to assets offering shrinking returns.

The $6.7 trillion currently parked in money-market funds reflects investor caution and a thirst for yield. As rates decline further, some of this capital is expected to flow into exchange-traded funds like SPDR Gold Shares. Investors understand the calculus: when returns elsewhere diminish, gold’s lack of yield becomes less of a deterrent.

Greg Shearer of JPMorgan summarized the situation succinctly: This is “the most bullish part of the cycle for gold.” In this phase, macroeconomic factors align to minimize gold’s comparative disadvantages, making it an increasingly attractive store of value.

What Lies Ahead

As we enter 2025, gold stands at the intersection of powerful macroeconomic forces. Declining interest rates, heightened geopolitical tensions, and increasing central bank demand create a strong case for continued growth. Yet the very factors that support gold’s rise—fear, uncertainty, and momentum—are also its potential vulnerabilities.

The persistence of these dynamics will determine gold’s performance in 2025. Will central banks continue to increase their reserves? Will geopolitical conflicts escalate or stabilize?

On January 19th and 20th, at the Vancouver Resource Investment Conference, we will spend two days discussing these issues and many more.

If you are curious about how to hedge against global uncertainty and an increasingly concentrated stock market bubble or how to increase your sovereignty by owning the only asset with zero counter-party risk, visit the Vancouver Resource Investment Conference at the Vancouver Convention Centre on January 19th and 20th.

I am flying in over 80 keynote speakers to join me on stage and break down how you can build a robust metals and mining investment portfolio for 2025.

Get tickets today: wwwVRICMedia.com

Ps. If you want to hang out with our rockstar line-up of keynotes at the VIP Cocktail party - individuals like Robert Kiyosaki, Rick Rule, Danielle DiMartino Booth, Ross Beaty, Andy Schectman, Grant Williams and many more - grab yourself a VIP ticket - these sell out every year, so act fast!

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That’s all for today. Have a great week!

Jay