The year 2024 will be remembered as an exceptional period for precious metals, particularly gold, whose dollar value jumped by almost 30%. This was gold's biggest rise for 17 years. The price of silver, although historically more volatile, also followed this spectacular trend, achieving its best performance since 2020.

But how can we explain such a significant adjustment? And above all, will this upward momentum continue in 2025? While gold and silver are largely influenced by global uncertainties, tensions in mining supply chains, and economic and monetary policies, will these factors continue to exert their influence?

The real value of gold at its highest since 1980 ! 

The year 2024 saw the real value of gold (adjusted for inflation) reach heights close to its 1980 record. In other words, gold has never been so expensive in terms of purchasing power. At that time, the price of gold peaked at almost $2,750 an ounce (in constant 2024 dollars), a level that could be breached in the months ahead.

Source : Gold Prices - 100 Year Historical Chart | MacroTrends

However, unlike the rapid surge of the 1970s and 1980s, the current rise in the price of gold is the result of a gradual recovery that began two decades ago. The speculative frenzy that characterised the late 1970s, with endless queues outside precious metals shops, is now less visible. Demand is now mainly driven by central banks, which have massively increased their gold reserves in response to geopolitical and economic uncertainties.

In addition, demand for gold for jewellery and investment purposes (coins, bars, etc.) is fluctuating positively, but quantities remain comparable over ten years. It is also worth noting the stability of gold's value against assets whose inflation has been ‘underestimated’ by changes in consumption. For example, the present value of a house or a bicycle expressed in gold remains more or less the same as it was in the 1970s.

Forecasts from the major banks

In its latest study, published at the end of 2024, Goldman Sachs forecasts that gold will reach $3,000 an ounce by the end of 2025. This trend would be supported by massive purchases by central banks, particularly in emerging markets. Starting in 2022, Goldman Sachs points out that these acquisitions have redefined the traditional relationship between interest rates and the price of gold. While gold has historically been less attractive when interest rates are high, central bank purchases have significantly boosted its value.

In addition, US debt, at 124% of GDP, is worrying investors and could encourage further diversification out of US bonds. As interest rates fall, Goldman Sachs expects renewed Western investor interest in gold-linked ETFs, boosting global demand and further stimulating prices.

Similarly, UBS, the Swiss banking giant (and major global player in gold), maintains a favourable view of the gold price. According to UBS, gold's rise is linked to Donald Trump's victory in the United States, fuelling expectations of high inflation, slower global growth and lower interest rates.

The Swiss bank also points out that gold continues to play a hedging and diversification role against economic and geopolitical uncertainties. The 5% year-on-year increase in global demand in the third quarter of 2024 and the resumption of ETF purchases by Western investors are fuelling optimism among the major banks. UBS is forecasting a target price of $2,900 an ounce by September 2025, supported by a Trump victory.

A buoyant gold market, driven by investor appetite 

The main components of demand for gold, essentially investment and jewellery, show a clear dynamism in the gold market in the second half of 2024. The high level of demand for gold confirms that the rise in the price of gold has not dampened this demand. This momentum means that gold prices will remain at the high levels reached in recent months.

Source : Gold Price Performance & Data | World Gold Council

For their part, central banks are continuing to accumulate gold. While the rate of accumulation remains high, it is lower than in 2022. In the third quarter of 2024, Poland, Hungary and Turkey added almost 70 tonnes of gold to their reserves. Other countries, such as Kazakhstan and the Philippines, have reduced their stocks by a total of around 15 tonnes. This dynamic, but not exacerbated, demand attests to the good health of the gold market.

Towards a high-risk 2025?

The annual performance of the US stock market, and in particular the S&P 500 index, reached almost 29% in 2024. This year follows an already particularly bullish 2023 (+24%). Against this backdrop, many managers point out that such a rise in the financial markets is often followed by a year of stagnation or correction.

This situation highlights the two fundamental properties of investment gold. Firstly, gold is positively correlated with stock market indices over the long term. As we can see in 2024, gold and the S&P 500 have both risen by around 30%.

On the other hand, gold often tends to perform well during stock market corrections, especially if these are accompanied by a recession. Gold's role as a defensive asset therefore remains essential for investors seeking to protect themselves against economic uncertainty.

Source : Real Gross Domestic Product (GDPC1) | FRED | St. Louis Fed

The economic risks looming in 2025 are manifold. Firstly, the potential return of unemployment is worrying. Although employment remained very resilient in the US and Europe in 2024, it could deteriorate rapidly in the space of a few quarters. Secondly, US economic growth remains at a particularly high level, and for a period not seen since at least 2006. While the economy is currently in good shape, the indicators are nevertheless pointing to an increased risk of a slowdown. These developments will need to be monitored closely.

Strategies and events to watch in 2025

Central bank decisions and global monetary policy

The policies of the major central banks will play a key role in 2025. These are primarily the US Federal Reserve (Fed), the European Central Bank (ECB) and the People's Bank of China. Although inflation continues to weigh on the United States and, to a lesser extent, the eurozone, the central banks could pursue monetary easing, rate cuts or even stimulus policies. While the pace of rate cuts is already well advanced in the US and Europe, it is likely to continue into 2025. Lower interest rates have been a major catalyst for the rise in precious metal prices this year.

A monetary stimulus policy in China would certainly have similar effects, with the balance sheet of the People's Bank of China swelling and, symmetrically, its gold holdings and retail demand increasing. As a result, central bank monetary policy could continue to exert upward pressure on gold, as lower bond yields increase the attractiveness of holding gold. On the other hand, an economic slowdown could prompt central banks to adopt even more accommodative policies, which would benefit gold and silver as safe havens.

Geopolitical tensions

International conflicts and geopolitical tensions, particularly in Eastern Europe, the Middle East and Asia-Pacific, could intensify demand for gold and silver. As was the case in 2024, political instability and the resulting uncertainty will encourage investors to turn to stable, tangible assets. The year 2025 will be full of geopolitical twists and turns with the return of Donald Trump to the United States and the advancement of numerous international conflicts.

Technological advances and industrial demand for silver

Unlike gold, silver has an essential industrial use. The rebound in demand for silver in recent years has been fuelled by renewable energy and semiconductor technologies. Silver is the best conductor of electricity.

The silver market is still experiencing a considerable supply deficit. However, this does not seem to be entirely reflected in prices. In 2025, accelerating investment in the energy transition, particularly in solar panels and batteries, could boost demand for silver. Governments and companies around the world are focusing on reducing carbon emissions, which could put continued upward pressure on the silver price.

Similarly, the high production costs seen in gold have contributed to this significant bullish adjustment. Gold mining companies should take advantage of gold's rise to regain margins that have been squeezed in recent years.

Fluctuations in the US dollar (and the euro)

Finally, gold and silver have an inverse relationship with the US dollar. So a weakening dollar (or euro for European investors) generally leads to a rise in the price of precious metals, as they become more attractive to holders of other currencies. In 2025, the direction of the dollar will depend on a number of factors, including budgetary decisions in the United States, the level of public debt and trade policies.

Over the course of 2024, the euro has lost more than 4% against the dollar, leading to a greater appreciation of gold in euros. This weakening of the euro comes on the back of the optimism generated by the arrival of Donald Trump in the White House.

In addition, Donald Trump's rather aggressive economic policies could sustain inflationary pressures and keep interest rates high. In the absence of a significant rebound in inflation, this could lead to a sustained rise in the dollar. Conversely, a disappointment linked to an economic slowdown could complicate the recovery of the US economy and reduce hopes of a rise in the dollar.

Silver heading for similar record highs?

The price of silver remains more volatile than that of gold, due to its hybrid nature: it is both a precious metal (ingots, coins, etc.) and an industrial raw material. Its real value has reached its highest level in ten years, but it is still a long way from the records set in 2011 ($60 per ounce in constant dollars) or 1980 ($140). Getting back to those levels would be equivalent to almost doubling the current value of silver.

Source: Silver prices - 100-year historical chart | MacroTrends

Despite this instability, the upward trend in silver is underpinned by growing structural demand. In the space of ten years, the boom in photovoltaic panels has increased pressure on a market that was already short of supply. The year 2025 could therefore mark a decisive turning point for this metal, which is essential to the global energy transition. What's more, silver can be an essential portfolio diversification tool (purchases of coins, ingots, etc.)

Conclusion 

2024 confirmed the central role of precious metals, particularly gold and silver, in an uncertain geopolitical environment. The exceptional performance of gold, which rose by almost 30%, and of silver, testifies to investors' growing interest in these safe-haven assets. This upward trend is being fuelled by several factors: the accommodating monetary policies of the major central banks, gold hoarding by monetary institutions, persistent geopolitical tensions, and growing industrial demand, particularly for silver.