Gold has experienced remarkable growth over the past two years, establishing itself as one of the best-performing asset classes in today’s uncertain economic environment. Understanding the key drivers and patterns behind these price increases reveals essential insights into why investors continue to flock to this precious metal as a haven investment.
Fact 1: Gold Reached Record Highs in 2024 with a 27% Annual Gain
The year 2024 marked an extraordinary milestone for gold prices, with the precious metal surging approximately 27% throughout the year. Gold prices climbed from around $2,000 per ounce at the beginning of 2024 to nearly $2,800 by year-end, setting multiple record highs during this period. In total, gold achieved 40 record highs during 2024 alone, a testament to the metal’s extraordinary performance.
This impressive surge represents more than just a single spike in demand. The increase reflected consistent upward pressure throughout the year, driven by multiple converging factors. The Federal Reserve’s decision to implement 75 basis points worth of interest rate cuts provided tailwinds for gold, which becomes more attractive to investors when interest rates decline and bonds become less appealing. This sustained strength positioned gold as the best-performing primary asset class over a consecutive two-year period spanning 2024 and 2025.
Fact 2: Central Bank Buying Has Dramatically Increased Since 2022
One of the most significant structural shifts in the gold market involves central bank purchasing behavior, which has fundamentally transformed the supply-demand dynamics. Before 2022, average monthly institutional demand for gold on the London over-the-counter market stood at a modest 17 tonnes. Following the freezing of Russian central bank assets in 2022 after Russia invaded Ukraine, this dynamic shifted dramatically.
By December 2024, this measure had skyrocketed to 108 tonnes per month, representing a fivefold increase in demand from what was previously considered normal. Central banks exceeded 1,000 tonnes of annual purchases for the third consecutive year in 2024, with purchases totaling approximately 1,045 tonnes. This buying spree reflects a strategic shift by countries around the world, particularly emerging market central banks including China, India, Turkey, and Poland, to diversify away from U.S. dollar reserves and strengthen their gold holdings as a hedge against geopolitical uncertainty and a store of value.
This structural increase in central bank demand has become a powerful floor under gold prices, providing substantial support regardless of other market fluctuations. Experts project that this trend will continue into 2025 and beyond, with estimates suggesting central banks will maintain quarterly purchases averaging around 710 tonnes.
Fact 3: Geopolitical and Macroeconomic Uncertainty Drives Long-Term Annual Growth
Beyond the recent surge, gold has demonstrated a long-term annual growth rate of 10.9% over the past 25 years, with robust performance during periods of global crisis and uncertainty. Historical data reveal that gold’s best-performing years consistently coincide with major economic or geopolitical disruptions. For example, gold delivered stellar returns of 31% in 2007, leading up to the Global Financial Crisis, and 29.6% in 2010, following the crisis. The metal also delivered 25% returns in 2020, during the onset of the COVID-19 pandemic.
The current environment closely follows this historical pattern. Multiple sources of uncertainty continue to propel gold higher, including trade policy volatility, escalating geopolitical tensions in Eastern Europe and the Middle East, emerging recession concerns, and significant government debt burdens, all of which contribute to gold’s appeal. Additionally, persistent inflation concerns and the weakening of the U.S. dollar have made gold an increasingly attractive investment for retail and institutional investors seeking portfolio diversification and inflation protection.
This enduring inverse relationship between gold prices and economic stability suggests that future annual increases may remain elevated as long as global macro conditions remain uncertain. Forecasts from major financial institutions predict continued strength, with predictions ranging from modest increases to potentially reaching $4,000 per ounce or higher by mid-2025 and beyond.
Conclusion
The annual increases in gold prices reflect a confluence of powerful trends: record central bank demand driven by geopolitical realignment, declining interest rates that make non-yielding assets more attractive, and persistent economic uncertainty that drives investors toward safe-haven assets. With central bank buying showing no signs of abating and global macro risks remaining elevated, gold’s long-term annual growth trajectory appears positioned to remain strong. For investors, this remarkable performance underscores gold’s enduring role as a critical component of portfolio diversification and risk management in uncertain times.
