Gold was one of the best-performing asset classes in 2024, outgaining the red-hot U.S. S&P 500.
People who follow financial news know that gold had a great year. Despite its typical apathy toward gold, even the mainstream was forced to sit up and take notice. But you may not realize just how well gold did.
Just how well did the yellow metal perform last year?
The gold price rose 26.5 percent in 2024, setting several new price records along the way. It was the biggest annual percentage gain since 2010 during the quantitative easing (money printing) years in the wake of the 2008 financial crisis.
During its sustained rally, gold set 40 new all-time highs based on the afternoon London Bullion Market Association p.m. price. The most recent was $2,777.80 per once on Oct. 30.
Gold also set a record in real terms, cracking the inflation-adjusted price all-time high set back in 1980.
Gold Beats US Stocks
Most people fixated on the red-hot U.S. stock market last year.
Gold was better.
The yellow metal edged out U.S. stocks to rank first among traditional asset classes.
Gold also performed better than U.S. bonds, dollars, commodities, and global treasuries.
With its huge post-election surge, Bitcoin was the only asset to beat out gold. The cryptocurrency price more than doubled, rising 111.5 percent.
The World Gold Council pinpointed three factors driving gold’s impressive bull run.
- Strong central bank and investor demand, which offset declining consumer demand
- Heightened geopolitical risk due to increased conflicts, along with a busy electoral year across the world
- Periods of opportunity costs when markets saw lower yields and a weakening U.S. dollar.
Don’t Overlook Silver
Silver remained well below its all-time high throughout 2024, creating the impression that it underperformed. However, it had a pretty solid year as well.
Silver kicked off 2024 at $23.99 per ounce and closed out the year at $28.91, a 20.5 percent gain.
Silver’s gains weren’t quite as beefy as U.S. stocks, but it still outperformed emerging market stocks, U.S. bonds, commodities, and global treasuries.
Investors will want to keep a close eye on silver as we move into 2025. Historically, silver has lagged behind gold in the early stages of a gold bull run but outperforms the yellow metal in the later stages of the rally.
There are also several signs that silver is underpriced.
Analysts project that there was a fourth straight supply deficit in the silver market, meaning there was more silver consumed than was pulled out of the ground or reclaimed through recycling. This market deficit is expected to come in at around 182 million ounces. This is in line with the supply shortfall in 2023. According to the Silver Institute, this market deficit is "elevated by historical standards."
The gold-silver ratio also indicates silver is underpriced. The current gold-silver ratio is over 88-1. That means it takes 88 ounces of silver to buy one ounce of gold.
In the modern era, the gold-silver ratio has averaged between 40-1 and 60-1. When the gold-silver ratio gets far above the high end of that historical average, it tends to return to the mean with a vengeance.
For instance, in 2020, the gold-silver ratio set a record of 123-1 as Covid hysteria gripped the world and then plunged to around 60-1 as central banks around the world cranked up the money creation machine to cope with governments shutting down economies.
Looking Ahead
Most mainstream analysts expect the gold bulls to keep running in 2025.
JP Morgan projects gold will crack the $3,000 level this year.
A JP Morgan analyst wrote, “We maintain our multi-year bullish outlook on gold for a third year in a row. … Gold still looks well situated to hedge the elevated levels of uncertainty around the macro landscape heading into the initial stages of the Trump administration in 2025.”
Central banks and Asian demand drove the 2024 gold rally, with Western retail investors largely remaining on the sidelines. If they jump into the market this year, we could see another strong upward price surge. An analyst told Yahoo Finance that falling interest rates as the Fed eases monetary policy coupled with a pickup in price inflation could boost Western demand.
Analyst Jesse Colombo thinks the next phase of the bull market could be right around the corner.
It's important to note that most mainstream analysts have a rather bullish view of the economy in general. They expect the economy to glide to a “soft landing” as the Federal Reserve keeps price inflation under control.
If there is a major economic crisis (and that is entirely possible given the massive level of debt and the large number of bubbles in the economy), the Federal Reserve will most likely slash rates back to zero and start running QE. After all, that's the fork it knows.
In this scenario, the price of gold would likely blow through the roof.
Originally Published on Money Metals Exchange.