What Drove Gold to US$2,800 in 2024: A Year of Uncertainty and Central Bank Strength

The precious metal experienced remarkable appreciation throughout 2024, climbing from approximately US$2,000 per ounce to near US$2,800 as multiple market forces converged. The surge reflects a complex interplay of monetary policy shifts, escalating global tensions, and investors seeking safe-haven assets amid economic uncertainty.

The Central Bank Factor: The Backbone of Gold’s 2024 Rally

Central bank purchases emerged as the primary engine propelling gold higher throughout the year. The World Gold Council’s data reveals that during the third quarter alone, these institutions accumulated 186 metric tons of gold, with Poland’s National Bank leading acquisitions at 42 metric tons.

Early 2024 set the tone for this trend. China’s purchase of 22 metric tons in the first two months signaled strong appetite from major economies. Turkey, Kazakhstan, and India similarly expanded their holdings, while Chinese wholesale demand surged to an unprecedented 271 metric tons in January—the strongest month on record.

Though fourth-quarter central bank buying has decelerated to 909 metric tons on a rolling four-quarter basis compared to 1,215 metric tons a year prior, these institutions remain committed gold accumlators. According to market strategist Joe Cavatoni, “As central banks continue to be significant buyers and geopolitical risks and global uncertainties drive investors towards the perceived safety of gold, the current environment underscores gold’s importance as a strategic asset for portfolio diversification and risk mitigation.”

Fed Rate Cuts: Setting the Stage for Momentum

The Federal Reserve’s monetary easing created a favorable environment for gold throughout 2024. The central bank delivered 75 basis points of cumulative rate cuts, beginning with anticipation in February that sparked an immediate rally.

When the Fed announced three to four potential rate cuts at the start of the year, gold responded dramatically. Jeff Clark, editor of Paydirt Prospector, explained the market dynamics: “All of a sudden, gold was off to the races. It jumped so high that suddenly, you had some short covering that needed to happen then as well. So you had short covering, which means they’re buying. And then you had momentum chasers and traders jumping all in.”

The September 50 basis point reduction proved particularly significant, coinciding with gold reaching US$2,672.51 on September 26. However, David Barrett, CEO of EBC Financial Group’s UK division, noted that “I still see the global central bank buying as the main driver—as it has been over the last 15 years. This demand removes supply from the market.”

Quarterly Performance: A Volatile Journey

Q1 Performance: Gold’s initial 2024 surge established the year’s trajectory. The metal reached its first record at US$2,251.37 by March 31, supported by central bank accumulation and robust Chinese wholesale demand. Chinese investors, facing nearly US$5 trillion in equity market losses over the preceding three years, gravitated toward gold as a portfolio hedge.

Q2 Momentum: The second quarter accelerated the uptrend, with gold establishing a new all-time high of US$2,450.05 on May 20. Central bank demand remained strong, and investor sentiment shifted as outflows from Western exchange-traded funds moderated. US-based SPDR Gold Shares, Sprott Physical Gold Trust, and Switzerland’s UBS ETF Gold all registered inflows despite European fund declines.

Q3 Consolidation and M&A Activity: By September 26, gold had climbed to US$2,672.51, reflecting sustained central bank purchases and Fed easing. The quarter witnessed significant consolidation in gold mining, with South Africa’s Gold Fields agreeing to acquire Canada’s Osisko Mining for C$2.16 billion, while AngloGold Ashanti purchased UK-based Centamin for US$2.5 billion.

Q4 Volatility and Geopolitical Spillovers: The final quarter opened at US$2,660.30 before experiencing a temporary retreat to US$2,608.40 on October 9. Recovery accelerated following a softer-than-anticipated September inflation reading (2.4 percent annually, 0.2 percent monthly versus forecasts of 2.3 and 0.1 percent), which reinforced expectations of November Fed action.

A 25 basis point rate cut on November 7 provided temporary support, pushing gold briefly above US$2,700. However, post-election repositioning and shifting risk sentiment created headwinds, with prices declining to a quarterly low of US$2,562.50 by mid-November. Gold rebounded to US$2,715.80 by November 22 before settling around US$2,660 entering December.

Geopolitical Tensions as Persistent Safe-Haven Demand

Eastern European and Middle Eastern instability proved instrumental in sustaining gold’s appeal. November developments particularly heightened safe-haven demand: the US authorized Ukraine’s use of ATACMS long-range missiles against Russian targets on November 17, mirroring authorizations by the UK and France. Russia responded by lowering its nuclear retaliation threshold to encompass conventional attacks from nuclear-armed nation allies, and demonstrated capabilities by launching an intermediate-range ballistic missile on November 21 carrying inert warheads.

These escalations reinforced gold’s role as portfolio insurance against systemic uncertainty, attracting capital throughout Q4.

Looking Ahead: 2025 Uncertainties

The year-end transition presents multiple questions for gold’s trajectory. Trump’s return to the White House introduces unpredictability regarding economic and foreign policy. His campaign emphasis on protectionist trade measures could disrupt global financial flows, while proposed economic policies risk reigniting inflationary pressures—both scenarios that historically support gold appreciation.

Throughout 2024, gold demonstrated its enduring value proposition as geopolitical polarization, central bank accumulation, and monetary policy shifts converge to make the precious metal an essential portfolio diversification tool.