Gold returned 12.92% in Q3 2024, starting the quarter at 2329.10 USD and ending at 2629.95 USD, per the LBMA fix PM price. Year-to-date, gold displayed a staggering performance of 27.20%. As a comparison, the S&P 500 is up 20.72% year to date and 5.25% during Q3 2024.
Since the beginning of 2024, gold has experienced increasing volatility, swinging between all-time highs and periodic sell-offs as investors took profits. Despite this, escalating geopolitical tensions, including the relentless conflicts in the Middle East and the ongoing Ukraine-Russia war, have strengthened gold’s role as a reliable safe-haven asset. These uncertainties further enhance gold’s attractiveness as a primary hedge against growing risks.
Besides, the Federal Reserve’s 50-basis-point rate cut in September added interest in gold. Looking ahead, more monetary easing is expected, with another 50 basis point cut anticipated by the end of 2024 and an additional 100 bp in 2025. As interest rates continue to decline, returns on traditional cash investments will diminish, encouraging more investors to buy gold, safeguarding their portfolios against lower yields and potential inflationary pressures.
Moreover, demand for gold remains strong, with central banks taking more and more importance in driving up prices. Official central bank buying now accounts for around a quarter of global gold demand, nearly twice the level seen before 2022. Demand from individual investors through physical gold or exchange-traded funds (ETFs) is also likely to accelerate. Notably, gold ETFs saw inflows for the fourth consecutive month in August and September, indicating a strong momentum.
China has also played a pivotal role in shaping the global gold market in 2024. The People’s Bank of China (PBoC) has been steadily increasing its gold reserves as part of its strategy to diversify away from the USD and mitigate the risks posed by global economic instability.
Analysts predict that China’s growing influence in the market, as it transitions from a follower to a global leader in gold demand, will have lasting effects, likely pushing prices higher in the future.
The upcoming 2024 U.S. presidential election is expected to be another critical factor influencing gold prices. Political uncertainty and concerns around economic policies, much like in previous elections, could lead to increased volatility in the markets. In the 2020 election, gold prices spiked following the vote due to heightened investor anxiety.
The 2024 election is shaping up to deliver similar outcomes, with both a lower interest rate environment and ongoing geopolitical tensions likely to drive further demand for gold, irrespective of the winner. A victory by Donald Trump, known for his protectionist policies and trade wars, could further increase economic uncertainty, making gold even more attractive as a safe-haven asset.
In summary, even though gold is trading at historically high levels, it remains a wise investment, as demonstrated by its strong performance in the earlier quarters of 2024. The combination of rate cuts, geopolitical risks, and looming uncertainties around the U.S. election continues to make gold an appealing asset for those seeking stability in uncertain times.
