As we enter 2025, the gold market continues the momentum from 2024, with prices climbing steadily. As of January 10, COMEX gold futures were priced at $2715 per ounce, an increase of 0.90%, marking the highest point since mid-December; London spot gold was priced at $2689.13 per ounce. Despite the US dollar's recent strength, the rebound in gold prices shows a "divergence" from the dollar's trend, highlighting its unique value as a safe-haven asset.
Geopolitical Tensions and Central Bank Gold Purchases Act as Catalysts
Hua'an Fund has noted that geopolitical risks are a significant factor driving the recent rise in gold prices. On January 1, 2025, a sudden terrorist attack occurred in the United States, and ceasefire negotiations in Gaza fell into a deadlock again, dampening market risk appetite and increasing the demand for gold as a safe-haven. Meanwhile, the decline in US Treasury yields further supported gold prices.
The ongoing gold purchasing behavior by central banks has also played a crucial role in supporting the rise in gold prices. On January 7, the People’s Bank of China released data showing that as of the end of December 2024, China's gold reserves had increased to $191.34 billion, totaling 73.29 million ounces, marking a second consecutive month of gold accumulation. In November and December 2024, China increased its gold holdings by 4.98 tons and 10.26 tons respectively, after an 18-month streak of gold purchasing from November 2022 to April 2024.
Analysts believe that the main purpose of central banks' gold accumulation is to counteract international uncertainty, enhance economic stability, and achieve diversified asset allocation. Not only China’s central bank, but also those of several developing and developed countries are taking similar actions, further boosting market confidence in gold.
Robust Performance of Gold Investments, ETFs Attract Substantial Capital
In 2024, gold assets received significant attention from investors, with multiple gold-related funds performing excellently. As of December 31, 2024, the annual returns of gold ETFs under E Fund and China Universal Asset Management exceeded 27%, while the returns of several other gold ETF connection products surpassed 23%. Additionally, QDII funds such as Huatai-PineBridge Gold & Precious Metals and China Southern Global Gold had gains of 24% and 23% respectively.
In terms of scale, gold ETFs also attracted large capital inflows. By the end of 2024, Hua’an Gold ETF’s annual shares increased by 1.84 billion, Yong Ying CSI Shanghai Shenzhen Hong Kong Gold Industry Equity ETF increased by 1.44 billion shares, and E Fund Gold ETF increased by 1.17 billion shares. The influx of funds into the gold market reflects investors' recognition of its safe-haven qualities.
Looking Ahead to 2025, Gold Remains an Important Asset Allocation
Institutional analysis suggests that the gold market will continue to be of interest in 2025. In the medium to long term, gold is gradually detaching from its reliance on the US dollar index, showing strong independence. With ongoing geopolitical risks, continued central bank gold buying, and increasing global economic uncertainties, gold is expected to maintain its safe-haven function.
However, some analysts caution that the future trajectory of gold prices still requires attention to changes in international situations and global monetary policy dynamics. As gold continues to strengthen, investors need to carefully assess its potential as a medium to long-term asset allocation tool and consider their own risk tolerance when making investment decisions.
