Gold Prices Hit Record Highs: Who's Buying?
While crypto has new friends in Washington and enthusiasts are hailing a "golden age of digital assets," gold remains a safe haven for many investors. Unlike crypto, gold is solid, concrete, and corporeal -- a tangible asset that has held value for millennia as a key material for jewelry production, a medium of exchange, and a basis for trade.
From a purely investing perspective, the precious metal had an impressive performance in 2024. The price of gold rose by 25.5 percent over the course of the year. This was driven by strong central bank buying, heightened geopolitical uncertainty, and market volatility. Gold reached 40 new all-time highs during the year, with an average price of $2,386 per ounce.
Gold has continued its strong performance in 2025, repeatedly hitting record highs.
Why is gold soaring? Are there broad economic concerns about this trend? And what should be your response and investing attitude toward gold?
Inflation means currency is devalued, and investment in precious metals such as gold is a way to hedge against further erosion.
Hedge funds and exchange-traded funds (ETFs) often include gold in their portfolios for diversification. It's a classic strategy to mitigate risk and diversify assets.
Gold is often seen as a "safe haven" investment, meaning it tends to retain value or even appreciate during economic downturns or market volatility. This is because it has intrinsic value and is not directly tied to the performance of the stock market or currency values.
For hedge funds, gold can act as a hedge against inflation and currency fluctuations. It provides a level of security in turbulent economic times. Meanwhile, ETFs that include gold give investors easy access to this precious metal without the need to physically own it. Gold ETFs typically track the price of gold and can be traded on stock exchanges just like shares.
Gold provides security and liquidity for central banks, especially during times of economic uncertainty. Gold operates outside the traditional banking system, making it immune to financial sanctions or asset freezes that could affect foreign currency holdings.
In 2024, demand for gold bars and coins in India and China stayed strong, while the United States was third in consumer gold consumption.
Gold investment demand grew particularly across Southeast Asian markets including Singapore, Indonesia, Malaysia, and Thailand, all of which reported double-digit increases year on year.
Meanwhile, as the price of gold rose, gold jewelry consumption fell, reflecting pressure from higher prices. Regardless, spending on gold jewelry jumped 9 percent to $144 billion.
However, it's best to also consider the risks before jumping in.
Gold prices can be quite volatile, driven by both global events and investor sentiment.
Additionally, investing in gold means locking up funds that could potentially earn higher returns in other assets such as stocks or real estate.
Unlike stocks, gold doesn't generate dividends or interest. And, if you buy physical gold, you'll need to consider storage and insurance costs.
However, forecasts are largely tied to recent history. Results this year may vary considerably if unexpected global events surprise central banks, nations, and investors alike.