‘Gold rush’ driven by geopolitics and consumer anxiety
12 Dec 2024
The global gold market is experiencing an unprecedented surge in demand, breaking records and drawing intense scrutiny from financial analysts and investors alike. Gold’s utility as a safe-haven asset has been reignited by a volatile geopolitical landscape, economic uncertainty, and shifting consumer behaviours, particularly in key markets like China and India. “The precious metals market has significantly moved this week, with gold rising above the $2,700 per ounce threshold,” explains Antonio Di Giacomo, senior market analyst at XS.com. “This increase is not a product of chance but a complex geopolitical scenario shaking the main regions of Asia and the Middle East, generating an immediate response in international financial markets.”
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Conflict hotspots such as Syria and heightened tensions around Taiwan as key drivers of the current instability.
“These events are not simply isolated incidents but part of a complex network of geopolitical tensions that directly impact investment strategies and the risk perception of international financial markets,” Di Giacomo continues.
“Gold has once again become the preferred destination for those seeking to preserve their inheritance during economic and political turbulence.”
The figures tell the story. Spot gold prices have climbed by over 3% this week alone, reaching $2,726/oz, reflecting growing volatility and investor anxiety.
China’s role in the rally
China has emerged as a dominant force in the gold market.
Economic challenges, including a faltering property market and limited investment options, have led many Chinese consumers and investors to seek security in gold.
Over 1,000 tonnes were purchased in 2023, primarily in jewellery.
However, as gold prices peaked at $2,800 in October 2024, many were priced out of the market, with retail sales of gold jewellery plummeting in key trading hubs like Shenzhen.
As a major gold producer, South Africa stands to benefit from the surging demand.
With gold prices near all-time highs, mining companies are likely to see increased revenues, potentially stimulating local economies.
However, questions remain about whether the sector is equipped to meet the rising global appetite for gold while navigating its own challenges, including energy constraints and labour disputes.
Have we reached peak gold?
Global demand for gold smashed records, almost reaching 5,000 tonnes in 2023, with the first quarter of 2024 alone accounting for 1,238 tonnes, the highest for a first quarter since 2016.
Jewellery continues to represent the largest share of demand at 48.7%, followed by investment at 23.3% and central bank purchases at 21.2%.
“When international conflicts threaten to destabilise economies and generate uncertainty, investors seek assets that have demonstrated their capacity to maintain value and offer stability in the most complex moments,” says Di Giacomo.
Markets will stay up
With geopolitical instability showing no signs of abating, gold’s status as a haven asset is unlikely to waver.
For South Africa and other gold-producing nations, the challenge will be to navigate this high-demand environment effectively while capitalising on the opportunities it presents.
Meanwhile, the question remains: how long can gold sustain its meteoric rise?
The coming months will be critical in shaping the trajectory of this “gold rush,” as central banks, investors, and consumers continue to seek refuge in this timeless asset.
