What factors contributed to the rise in gold prices?
A number of factors contributed to the golden gains for the yellow metal during the current year, including the spread of interest rate-cutting fever in many central banks, as the Federal Reserve cut interest rates by three-quarters of a percentage point for the first time since the pandemic, the European Central Bank cut interest rates three times during the year, and the Bank of England cut interest rates during 2024 by about 50 basis points.
Geopolitical tensions in the Middle East have also fueled gold prices as a safe haven in times of economic uncertainty, and increased demand from central banks.
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Ahmed Osama, chief economic analyst at Evest, told CNBC Arabia: “Gold has seen increases of more than 54% during the last 12 months, witnessing one of the biggest historical upward waves, noting that there are several reasons supporting these increases. Gold has become one of the most important safe havens in the markets during the recent period, as a result of central banks’ trend since the beginning of the year to try to move towards an easing policy by reducing interest rates, which was not an easy matter for major banks, which prompted investors to resort to buying gold strongly.”
Osama said that lowering interest rates puts pressure on currencies and makes gold and stock markets more attractive to investors. This has pushed gold to record highs, especially after the Federal Reserve cut interest rates by 50 basis points for the first time in four years last September.
Gold purchases by major central banks, particularly China, have contributed to increased demand and a significant rise in prices. Although central bank purchases have recently slowed, markets believe this pause is only temporary, and demand for gold is likely to rebound if interest rates continue to fall, financial crises in some countries escalate, and global geopolitical tensions intensify, according to Osama.