Gold finished January on an all-time-high of US$2,812, up 8 per cent on the month, adding another positive start to its strong seasonal record, the World Gold Council (WGC) said in its latest market update.
According to its modelling, the WGC said gold’s rise was largely propelled by a rise in geopolitical risk, alongside tariff fears, a weaker US dollar and bond yields.
Moreover, strong interest from China fuelled momentum, signalling a strong start to an “auspicious” Year of the Snake for gold.
“Chinese gold market activity appears to have stayed true to its seasonal pattern and suggests follow-through into February,” the council said.
In a separate note, the CEO of the deVere Group, Nigel Green, said demand for gold from China will continue to flourish on the back of a major policy shift in the country which will allow insurers to invest in bullion.
Namely, for the first time, Beijing has approved a pilot program allowing insurers to invest in gold, unlocking billions in potential inflows into the market.
“China’s green light for insurers will supercharge demand,” Green said. “This comes on top of central bank buying that is already at its highest level in decades.”
Green highlighted that this factor coincides with macroeconomic conditions already favouring a prolonged rally in precious metals, including stubbornly high inflationary pressures which are being exacerbated by Trump’s tariff policies.
China and the US aside, the WGC also highlighted the upcoming German elections as an event with the potential to spike a rise in gold.
According to the council, while the German elections might be flying under the radar given the noise around US tariffs, the elections could actually trigger a much more positive growth outlook.
“This, in turn, could support the euro versus the US dollar in the process. A weaker US dollar is not a consensus view, but unforeseen pressure on it could herald further support for gold,” the council said.
On top of the possibility of a sustained strengthening of the euro versus the US dollar, the council also cited continued pressure on the dollar as a result of Japan’s domestic demand and expected rate hikes.
“US exceptionalism might find a challenge from these two corners, pressuring the US dollar lower – which given the consistent relationship with gold – can add further support to gold’s incumbent strength,” the council said.
Moreover, deVere’s Green highlighted the potential revaluation of US gold reserves, noting that while they’re currently valued at $42 per ounce, speculation is growing that the Treasury could revalue them at market prices of around $2,800 per ounce.
If enacted, this move could inject an estimated $800 billion into the Treasury General Account, reducing reliance on bond issuance and strengthening confidence in gold as a monetary asset.
“Re-marking gold to its real market value could be a transformative financial event,” Green said. “It would not only reinforce gold’s role as a core store of value but also amplify its already accelerating price surge.”
Data from the WGC earlier this month further revealed that while central banks were a key driver of gold demand in 2024, purchasing over 1,000 tonnes of the precious metal throughout the year, a resurgence in gold exchange-traded fund (ETF) demand in the second half of the year helped push investment demand to a four-year high.
The WGC’s Gold Demand Trends: Full Year 2024 report stated that total demand for gold reached a record 4,974 tonnes in 2024, with global investment demand for the metal increasing 25 per cent year-on-year to 1,180 tonnes.
Key factors behind this rise in demand include heightened geopolitical uncertainties, shifting expectations around interest rates and the strongest annual gold price performance since 2010, all of which fuelled interest in gold-backed ETFs.
The World Gold Council predicts that in 2025, ETF investors are expected to play a greater role alongside central banks – which have dominated gold demand in recent years – especially if interest rates remain low and geopolitical risks continue.
