Diego Franzin, Head of Portfolio Strategies Plenisfer Investments SGR
Gold has shone in the markets in 2024: its price reached historic highs, and the year ended with an impressive performance (+27% in USD), second only to that of the Nasdaq (+28.6%).
This rally has now been ongoing for three years, driven by several factors.
Firstly, central bank purchases. Countries such as China, India, and Turkey have increased their gold reserves to diversify assets at the expense of the US dollar. Globally, central banks purchased 694 tons of gold in the first nine months of 2024, and in November, the People’s Bank of China announced it would resume gold purchases after a six-month pause.
Another supporting factor is the uncertainty related to geopolitical developments. It is not only the conflicts in Ukraine and the Middle East that are driving investors toward a safe haven like gold but also the uncertainties surrounding Trump’s future policies. Trump’s electoral victory in November provided one of the most favorable scenarios for gold, as it heightened geopolitical uncertainty, compounded by expectations of further fiscal spending growth in the United States.
Finally, monetary policies play a role. During the phase of rising interest rates, gold represented the ultimate hedge against inflation targeted by monetary policies. In the current phase of rate cuts, it continues to offer an alternative to other asset classes, even though the cost-benefit of holding gold has increased. Gold prices experienced a slight decline after the Fed lowered rates in December. However, it is worth noting that the US central bank also indicated that rate reductions in the coming year will proceed more slowly than previously anticipated.
Looking ahead to 2025, some estimates suggest that gold could reach $3,000 per ounce, supported by the continuation of the factors described above and a potential resurgence of inflation driven by the fiscal and trade policies of the new President Trump, as well as expectations of a further increase in the US record-high public debt.
At Plenisfer, we believe that, regardless of short-term price trends, gold will continue to play several key roles in an investment portfolio in 2025.
It will remain a strong diversification element, helping to reduce portfolio volatility thanks to its low correlation with other assets. It will continue to offer protection against inflation, which historically occurs in waves and could, particularly in the US, remain above the levels currently anticipated by the markets.
Lastly, it will persist as a safe haven asset in times of economic or geopolitical uncertainty.
Disclaimer
This analysis pertains to Plenisfer Investments SGR S.p.A. (“Plenisfer Investments”) and is not a marketing communication related to any fund, investment product, or investment service in your country. This document does not constitute an offer or an invitation to sell or purchase securities or any activity or business described herein and does not form the basis of any contract.
Any opinions or forecasts provided are current as of the specified date, are subject to change without notice, do not predict future results, and do not constitute a recommendation or offer of any investment product or service. Past performance does not guarantee future returns. There can be no assurance that an investment objective will be achieved or that there will be a return on capital. This analysis is intended exclusively for professional investors in Italy as defined by the Markets in Financial Instruments Directive 2014/65/EU (MiFID). It is not intended for retail investors or US Persons, as defined in Regulation S of the United States Securities Act of 1933, as amended.
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