Gold's Exceptional Year: A Result of Monetary Policy Support and Rising Geopolitical Risks

Monday 30 December 2024 - 11:05

In 2024, gold has experienced its most significant annual gains of the 21st century, driven by a combination of factors including the easing of monetary policy in the United States, growing geopolitical risks, and central banks' increasing desire to accumulate the precious metal. This surge in gold prices highlights its status as a safe-haven asset in times of uncertainty, outperforming many other base metals in the process.

Despite a temporary dip in prices following the political shifts in the United States, gold has still risen by approximately 27% this year. This increase stands in stark contrast to the performance of other base metals, which have faced a challenging year due to a slowdown in China's economy. Iron ore futures, for example, have fallen by around 29%, and lithium has experienced its second consecutive annual loss, largely due to oversupply issues exacerbated by turbulence in the electric vehicle industry.

The LMEX Index, which tracks a basket of metals including aluminum, copper, nickel, zinc, lead, and tin, has only seen modest gains of about 6% for the year. This underscores the contrasting fortunes of gold, which has benefitted from both macroeconomic and geopolitical shifts, while industrial metals have struggled.

As the new year begins, investors remain cautious and closely monitor ongoing uncertainties surrounding U.S. monetary policy, potential trade tensions under President Trump's administration, and China's efforts to stimulate its economy. These factors continue to influence global markets, with gold expected to maintain its position as a strong performer amidst these challenges.

Gold’s remarkable rise this year underscores its enduring appeal as a hedge against instability and its role as a key asset for investors seeking safety in unpredictable times.