Gold Soars as WGC Reports Record Demand

The gold price reached a new record intraday high on Wednesday, 5 February, adding to the rally that saw the precious metal hit an all-time high on Tuesday, 4 February, closing at $2,842.02 per oz. Fears of an escalating trade war between the US and China saw investors turn to gold as a haven.

At the same time, the World Gold Council has reported that 2024 was another record high for gold demand, fuelled especially by central banks and investors seeking protection from inflation.

Gold Performance Chart

Gold (XAU/USD) set a fresh record set on Tuesday 4 February as the price closed above the peak set on 29 October to form its first record high of 2025.

The yellow metal is continuing its multi-year uptrend with the price comfortably above its 200-day moving average, which it first crossed above back in October 2023. Technical analysts use moving averages as a tool to determine the direction of the trend. The price holding above generally denotes an uptrend, while the price staying below the average suggests a downtrend. (Source: Investopedia)

*Past performance does not indicate future results

Why Is Gold at a Record High?

US-China Trade War

In response to the United States imposing a 10% tariff on Chinese imports effective 4 February 2025, China has announced retaliatory measures. Starting 10 February 2025, China will implement a 15% tariff on US coal and liquefied natural gas and a 10% tariff on crude oil, agricultural machinery, and large-engine cars. 

Additionally, China has imposed export controls on critical minerals essential for high-tech products and initiated an antitrust investigation into Google, and there are reports that it could be about to do something similar regarding Apple’s App Store dominance.

Gold gained ground in 2024 because investors were looking for a hedge against the risks posed by a new trade war between the US and China. Economists mostly view higher tariffs as inflationary.

Demand from Central Banks & Investors

Trade barriers could also spur China to increase its gold reserves relative to its holdings of US Treasuries. 

In 2024, global gold demand, including over-the-counter (OTC) trading, increased by 1% to a record 4,974.5 metric tons, driven by a 25% rise in investment demand to 1,180 tons. According to the World Gold Council, central banks also accelerated their gold purchases in the fourth quarter by as much as 54%.

The WGC also notes that the total gold supply edged up by 1% year-over-year to 4,974 metric tons, marking the highest level recorded in the data series. The increase was driven by growth in both mine production and recycling.

Conclusion: Will Gold Keep Trending Higher?

Gold’s record-breaking rally has been fueled by strong investment demand, increased central bank purchases and growing concerns over the escalating trade war between the US and China. As investors seek safe-haven assets to hedge against inflation and market uncertainty, gold has remained a top choice.  

However, risks to further price upside include higher than expected interest rates, a stronger US dollar, and a resolution to trade tensions, which could dampen safe-haven demand. Additionally, if inflation cools and/or economic conditions stabilise, investors may rotate out of gold in favour of riskier assets. (Source: CNBC)

Still, past performance does not indicate future results, and only time will tell what lies ahead for the bullion.