Gold's remarkable performance in 2024, its best year in over a decade, has been driven by central banks diversifying away from the dollar and geopolitical uncertainties bolstering its status as a safe-haven asset. Despite the rise in real yields and a stronger dollar, gold has maintained its purchasing power, serving as a hedge against fiat currency debasement due to unchecked government fiscal policies. The shift in fiscal policy, with governments expanding pro-cyclical spending, has further fueled demand for gold as a stable store of value.
However, gold's recent stellar performance has left it overbought, making it susceptible to a price correction. Historically, January is gold's best month, but downward momentum could trigger selloffs, especially if central-bank buying eases or Asian demand wanes. Additionally, a less dovish Federal Reserve could lead to higher global real yields, typically a headwind for gold prices. Despite these short-term challenges, the fundamental reasons for holding gold—sovereign largesse, fiat-currency debasement, and geopolitical uncertainty—remain strong, suggesting continued long-term demand.
As of 19:21 on January 9, GLD, an ETF that tracks the price of gold, is trading at $245.55, slightly above its last close of $244.56. This positions it within 6% of its 52-week high of $257.71, reflecting ongoing investor confidence in gold as a hedge against financial uncertainty.