Gold prices rose sharply in 2024. Is it a good time to invest in gold?

Gold prices have soared by more than 30 per cent since the start of 2024, reaching a record high of just under US$2,800 (S$3,754) per ounce by late October. It dipped to around US$2,600 per ounce following Donald Trump’s victory in the US elections on Nov 6.

What’s driving the surge?

Mr Heng Koon How, head of Market Strategy, Economics and Treasury Research at UOB, points to two groups of investors:

• Central banks in Asia – including Singapore – and emerging markets that are increasing their allocation of reserves into gold, and;
• Retail investors who are rushing to buy physical gold and jewellery amid economic and geopolitical uncertainties.

On the central bank front, “China (in particular) caught everyone’s attention with its strong allocation into gold”, Mr Heng, says.

According to the World Gold Council (WGC), China’s official holding of gold rose 20 per cent from 1,900 tonnes just two years ago to about 2,264 tonnes as of Oct 2024. This accounts for more than 5 per cent of the country’s total reserves.

Typically, central banks in Asia and emerging markets hold less than 5 per cent of their balance sheets in gold, explains Mr Heng, while those in Europe and developed markets hold an average of 10 per cent or more.

But the elevated risk of global trade conflicts and sanctions are motivating central banks in Asia and emerging markets to increase their allocation, he says.

An annual WGC survey of global central banks published in June found that central banks in emerging markets cite gold’s immunity to sanction risks and pessimism towards the US dollar as two top reasons for allocating more reserves into gold.

WGC also notes that the Monetary Authority of Singapore purchased 75 tonnes of gold in the first nine months of 2023. This makes Singapore’s central bank the third-largest buyer of gold in the world after China and Poland.

Meanwhile, more retail investors globally are buying physical gold products like gold wafers and nuggets as a hedge against increasing uncertainty.

Across Asia, retail investors are flocking to stock up on physical gold in countries like China, Thailand and Vietnam. Singapore banks noted an increase in young retail investors turning to gold as an affordable investment option. Among UOB’s gold investors, the proportion of customers aged 30 to 40 rose 25 per cent between Dec 2021 and April 2024.

The trend is fuelled by geopolitical risks, Mr Heng explains, pointing to the Russia-Ukraine and Israel-Palestinian conflicts, and “currency depreciation across emerging markets and in Asia over the past few years”.