In 2024, the price of gold rose 27%, the strongest annual return since 2010 and significantly outperforming most commodities as well as global equities, bonds and cash.

Gold’s robust performance was driven by several factors, including (1) an inflection in the interest rate cycle by central banks, (2) persistently high inflation, (3) record aggregate demand, (4) increasing concerns about sovereign fiscal debt sustainability, (5) escalating geopolitical tensions, and (6) a potential global, tit-for-tat trade war that could disrupt markets and further boost the precious metal’s proven safe-haven allure.

First, in 2024 monetary policy started to loosen after considerable tightening in prior years to combat severe inflationary pressures emanating from Covid-related supply chain dislocations and pent-up demand from revenge spending.  Major central banks such as the Federal Reserve, European Central Bank, and Bank of England partly reversed restrictive policy by cutting interest rates.  Historically, gold benefits from lower interest rates because it is a negative-carry asset (gold does not pay a yield and traditionally has associated costs for storage, insurance, and management – notwithstanding the unique IPMB Ecosystem, GoldPro Token, and GEM NFT) and thus becomes more competitive against yield-bearing securities.

Second, while global inflation has receded from unprecedented levels a couple of years ago, it remains an intractable problem, contributing to a cost-of-living crisis around the world.  The vast majority of countries have inflation readings above their target, resulting in lower purchasing power for consumers and businesses via fiat currency debasement.  The advent of quantitative easing during the Great Financial Crisis in 2008-09 exacerbates the issue of currency depreciation – the Federal Reserve’s balance sheet rose from $900 billion in 2007 to $6.9 trillion in 2024, an increase of nearly eight times.  In 2002, Ben Bernanke, who was chairman of the Federal Reserve during the aforementioned Great Recession, suggested “helicopter money” could always be deployed to prevent deflation.  Unorthodox monetary policy that involves figurately dropping money from the sky can result in negative equity for central banks and negate the perceived benefits of monetising fiscal deficits, inevitably raising the economics dilemma on whether money should be fully backed by segregated assets – like gold – and the calling into question the wisdom of leaving the gold standard back in 1971 which effectively ended the Bretton Woods system.  As the academic Friedrich August Hayek presciently asserted, “With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.”  It is not a coincidence that gold has materially outperformed all major fiat currencies – bar none – over a 1-, 3-, 5-, 10-, 20-, and 25-year year time horizon…and last century too.

Total Return vs. USD Through 2024

Third, according to the most recent quarterly data from the World Gold Council, in Q3 24, total gold demand increased 5% year-over-year to 1,313 tons, exceeding $100 billion for the first time on record due to vigorous investment by central banks, buoyant industrial usage especially in the semiconductor industry as capital expenditure for artificial intelligence proliferates, and supportive consumption trends for bars, coins, and jewellery amid an all-time high gold price environment (helped by a reduction in import duties in India).  Underlying demand was accentuated by central banks looking to diversify their foreign currency reserves and mitigate US dollar hegemony along with positive inflows into gold-backed ETFs.

Fourth, global public and private debt exceeds $320 trillion, equating to approximately 290% of worldwide GDP, which arguably is soon reaching or already breaching unsustainable levels both in absolute and relative terms.  The paradox of an unstoppable force – exponential fiscal and monetary profligacy – meeting an immovable object – the bond vigilantes – creates economic uncertainty and tension in the “fixed” income market.  This conundrum of physics actually supports the tangible properties of gold as a safe-haven investment since haemorrhaging debt outweighs higher bond yields.  In essence, “Gold is money.  Everything else is credit,” postulated J. P. Morgan.  His namesake company just became the first bank in history to top $50 billion in annual profit in 2024, so JPMorgan Chase obviously knows something about money/gold.

Fifth, gold is benefiting from intensifying geopolitical chaos and frictions around the globe, including the Russia/Ukraine war; the mounting risk of a China/Taiwan skirmish (TSMC, valued at over $1 trillion despite minimal recognition, is a critical linchpin to technology advancement, manufacturing the semiconductors for Nvidia’s artificial intelligence accelerators and Apple’s iPhone and vulnerable to a possible invasion of the island); Israeli conflicts with the Iranian militia proxies of Hamas in Gaza, Hezbollah in Lebanon, and the Houthis in Yemen; the political vacuum in Syria after the sudden downfall of a notoriously tyrannical regime; collapsing majority governments in Germany and France, Europe’s two largest countries; and a polarising relationship between the US and China, the two largest economies.  Empirically, gold has been positively correlated to clashes among countries, given its longstanding sanctuary status.

Sixth, after winning the presidential election, Donald Trump has threatened to impose tariffs on imported goods against friends and foes alike.  While the magnitude and sequencing of trade levies are uncertain, the likely result will be higher inflation and lower growth.  Interestingly, since the election, the gold price has been very resilient as the pervasive economic uncertainty in the future has “trumped” the recent strength of the dollar and the  notable increase in bond yields (which is uncharacteristic since gold has a negative correlation to those two variables).

With a return of 27% and volatility of 11% in 2024, gold delivered an information ratio of 2.5x, ranking among the best risk-adjusted returns of any asset class.  Investors are increasingly realising gold’s value as a hedge against inflation, economic ambiguity, market turbulence, and geopolitical turmoil as well as an efficient portfolio diversification strategy given its defensive qualities.  The secular drivers that contributed to gold’s performance in 2024 should continue in 2025, reinforcing gold’s prominence as not just a store of value but an attractive, non-correlated asset with durable and favourable underlying fundamentals.  Tokenization of gold through GoldPro Tokens and GEM NFTs can further Augment – Au is the chemical symbol for gold – the attraction of this unique asset by maximising upside potential and minimising downside risk.

About IPMB

IPMB is transforming gold ownership through tokenization, bringing the lowest-cost access to gold globally. With a dual-token model, IPMB introduces two gold-backed assets: the GoldPro Token, a hybrid utility & payment token, and GEM NFTs, providing direct ownership of LBMA-certified gold with zero management fees. By tokenizing every step of our gold supply chain, from mining to vaulting, IPMB enables secure, affordable gold acquisition, portfolio diversification, and seamless global payments, including exclusive discounts at some of the world’s most luxurious and popular retailers.