The precious metals market has moved significantly this week, with gold briefly rising above the $2,700.00 per ounce threshold mid-week. The price moves are prompting discussion of a possible $3000 level for gold in 2025.
This latest increase is not a product of chance but a complex geopolitical scenario that is affecting Asia and the Middle East at the moment, generating an immediate response in international financial markets. Geopolitics has been a major consideration for the gold market in 2024 and this may not change next year.
The figures support this trend: spot gold has experienced a significant increase since the market opening this week, with over 3%, pushing the price to the $2,726.00 per ounce zone, before retracing in the last 48 hours, pricing at $2,665 as of Friday lunchtime. The increase this week reflects the current volatility in precious metals prices and investors’ search for stability in an international landscape marked by uncertainty and tension.
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The current geopolitical context presents multiple conflict hotspots contributing to this phenomenon. The situation in Syria, following the recent government overthrow, has generated an environment of regional instability that is keeping the international community on edge. Simultaneously, China’s military movements around Taiwan have elevated diplomatic tension in East Asia, adding another layer of complexity to the global scenario.
Some of this could be the result of a lame duck administration in the US, where we await the advent of the Trump administration next month. Political instability in South Korea represents another element contributing to this climate of uncertainty.
Some analysts see these events as not simply isolated incidents but part of a complex network of geopolitical tensions that directly impact investment strategies and the risk perception of international financial markets.
Central bank buying of gold remains elevated
Talking to precious metals specialists at the Resourcing Tomorrow conference in London last week, we also heard – again – the observation that central bank buying is playing an important role in the gold price. This has been the case since 2022, with central banks in Asia in particular seeking to reduce their USD assets.
In the absence of another asset on the scale and liquidity of the USD – there are simply not enough CHF to go around, and the JPY is following a somewhat opaque monetary policy course – gold has stepped into the breach.
According to the World Gold Council, Q3 central bank net purchases of 186 tons lifted year to date buying to 694 tons – below the 2023 record but in line with the same period of 2022.The National Bank of Poland was again the largest buyer, adding 42 tons to gold reserves. On a rolling four-quarter basis, net buying of 909 tons by central banks remains well above longer term average levels. We await the Q4 numbers with interest.
Asset protection and gold
Investors have responded almost instinctively to this landscape, using a traditional asset protection strategy. Historically considered a haven, gold has once again become the preferred destination for those seeking to preserve their inheritance during economic and political turbulence.
This trend is not new but responds to a well-established historical pattern. When international conflicts threaten to destabilize economies and generate uncertainty, investors seek assets that have demonstrated their capacity to maintain value and offer stability in the most complex moments.
The recent increase in gold prices is much more than a simple market fluctuation. It represents a clear indicator of the global perception of the current international situation, where geopolitical instability drives investors to seek refuge in one of the most traditional and reliable assets in world financial history.
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