Gold is the best hedge against risks
Source: Bloomberg
Since the beginning of the year, gold is up 27%, slightly outperforming the S&P 500 return. In 2024, the rising gold price was driven by strong demand from central banks and investors, and lower rates of global central banks. An additional factor was escalation of global geopolitical tensions amid conflicts in the Middle East.
Significant growth of US tech companies has driven high concentration of stocks in investors’ portfolios. Against the backdrop of the current macroeconomic environment, investors used gold as a tool to mitigate risks of high concentration of US stocks in their portfolios and as a hedge against inflation and geopolitical risks.
Gold price is expected to rise further in 2025.
Global central banks are continuing to buy gold at a rapid pace. China was the largest buyer of gold in 2024, but the Bank of India was the leader in terms of purchase volumes in 3Q. Inflation risks are growing amid the duties imposed on imports of goods in the US, which, coupled with geopolitical tensions in the world, may raise gold prices ranging from $3,000 to $3,200 per troy ounce.
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