Gold Edges Up After Record-Breaking Run Triggers Profit Taking

Gold prices surged to record highs in 2024, driven by a perfect storm of factors, including central bank buying, investment demand, geopolitical risks, and a weak US dollar. However, the recent rally has triggered profit-taking, leading to a slight decline in total gold supply. This article explores the dynamics behind the record-breaking run and the impact of profit-taking on the gold market.



Gold prices soared in 2024, reaching an all-time high of $2,954.92 per troy ounce in February. This remarkable run was fueled by several key factors:

1. Central bank buying: Central banks continued to hoover up gold at an eye-watering pace, with buying exceeding 1,000t for the third year in a row, accelerating sharply in Q4 to 333t. This increased demand for gold as a safe-haven asset and a store of value.
2. Investment demand: Annual investment reached a four-year high of 1,180t (+25%), with gold ETFs playing a significant role. The first year since 2020 in which holdings were essentially unchanged, in contrast to the heavy outflows of the prior three years.
3. Geopolitical risks and uncertainty: Geopolitical risks, such as the Russia-Ukraine conflict, and global economic uncertainty, drove investors to seek the safety and stability of gold.
4. Weak US dollar: A weak US dollar made gold more affordable to international buyers, further boosting demand.
5. Supply constraints: Mine production and recycling growth contributed to the increase in total supply of gold, but the pace of growth was not enough to keep up with demand, leading to a tightening of the gold market.
6. Inflation concerns: Persistent inflation concerns and expectations of higher interest rates led investors to allocate more funds to gold as a hedge against inflation and a store of value.

These factors combined to create a perfect storm for gold prices, driving them to record highs throughout the year.



However, the recent rally has triggered profit-taking, particularly in the OTC investment segment. This led to a slight annual decline in total gold supply in 2024, despite an increase in mine production and recycling. The slowdown in OTC investment, driven by profit-taking, had a significant impact on the investment landscape, affecting the overall demand for gold and the gold price trend.

Central bank buying and ETF investment played a significant role in driving gold prices in 2024. Central banks continued to hoover up gold at an eye-watering pace, with buying exceeding 1,000t for the third year in a row, accelerating sharply in Q4 to 333t. This strong demand from central banks contributed to a record annual total of 4,974t, which was a high for our data series. Additionally, annual investment reached a four-year high of 1,180t (+25%), with gold ETFs having a sizable impact. In 2024, it marked the first year since 2020 in which holdings were essentially unchanged, in contrast to the heavy outflows of the prior three years. This strong demand from central banks and ETF investors, coupled with other factors such as high jewelry consumption and a weak US dollar, contributed to the record high gold prices seen in 2024.

In conclusion, the record-breaking run of gold prices in 2024 was driven by a perfect storm of factors, including central bank buying, investment demand, geopolitical risks, and a weak US dollar. However, the recent rally has triggered profit-taking, leading to a slight decline in total gold supply. Central bank buying and ETF investment played a significant role in driving gold prices in 2024. As the gold market continues to evolve, investors should stay informed about the key factors influencing gold prices and the potential impact of profit-taking on the overall investment landscape.