Gold is crashing

This year, gold has hit record-high prices, but recently its price plummeted to the lowest point in months.

After starting the year at $2,062 per ounce, gold soared to nearly $2,800 per ounce in October 2024.

Since 2019, the price of the precious metal has risen 85% as demand has spiked. According to the World Gold Council, demand for gold hit a record high of $100 billion in the third quarter of 2024. 

Krish Gopaul, a senior analyst at the World Gold Council, said overall demand for the commodity is up 5% year over year. 

However, in November, the price of gold saw a steep decline, hitting its lowest price since September at less than $2,600 per ounce. 

Joe Klopper, Portfolio Manager at Independent Securities, explained on The Money Show with Stephen Grootes that this is likely a result of the stronger dollar, which is the fallout of Donald Trump’s election as US president. 

“With these tariffs and policy plans, it is possible to expect inflation to start bubbling up again in the US, and that could cause the Federal Reserve not to cut as aggressively or even hike rates at some stage,” Klepper said.

Higher inflation rates and a stronger dollar are “not good for the gold price”. 

Klopper explained that Trump’s statements about ending the unrest between Russia and Ukraine have also influenced gold’s recent price drop.

Rising global uncertainty following the Russian invasion of Ukraine and fears of a regional war in the Middle East have helped boost the gold price this year since people tend to flock towards safe-haven assets in times of uncertainty. 

Gold has had a very strong run this year, aided by increasing demand from central banks around the world as they search for stability amid elevated political and economic uncertainty. 

Since gold has always been considered a safe-haven asset, if Trump manages to broker a peace deal, “ there’s good reason for gold to trade off”, Klepper said.

Between January and October, the metal’s price skyrocketed nearly 40%. “It is time for a bit of profit-taking,” Klopper said, adding that it is not uncommon to see gold prices move 20% or more. 

“I think it’s just the market taking a bit of bit of a breather on gold. We saw a similar reaction in the gold price when Trump was initially elected in 2016,” he said.

He noted that once things settle down, the gold price will likely recover over time.

Any economic instability or unrest over the next few years, especially between Israel and Palestine, could also help boost the price for this safe-haven asset once again, particularly given how outspoken Trump has been in his pro-Israel stance. 

Platinum prices have also taken a hit recently, Klopper explained. The metal peaked this year at nearly $1,100, but since the end of October, the prices have dropped to under $950.

This, he said, is due to the efforts of the parties of the United Nations Framework Convention on Climate Change (UNFCCC) – the Conference of the Parties (COP). 

This group assesses progress in dealing with climate change and sets green energy plans and emission targets to help achieve these goals. 

Since platinum and palladium are used in internal combustion engines, which are used in cars, boats, ships, aeroplanes, and trains, they have been hit hard by reduced emission targets. 

There is the possibility of palladium prices being affected by a possible peace deal between Russia and Ukraine, which could result in Russia’s palladium ban being overturned. 

Earlier this year, Paul Dunne, the CEO of Northam Platinum, stated that South Africa’s platinum mining industry has entered a phase of irreversible decline. He noted that producers are struggling with low prices, and demand is further affected by the rise of battery electric vehicles, Reuters reported.

According to data from Johnson Matthey, platinum output in South Africa, the world’s leading supplier of the metal, has been gradually decreasing since it peaked at approximately 5.3 million ounces in 2006.

“We haven’t replaced that asset base and the asset base is a depleting asset, all mines are depleting assets from day one,” Dunne said.

“This will exacerbate the natural depletion of South Africa’s ageing shafts.”

The CEO estimates that platinum output across the industry is likely to decline by 500,000 ounces every five years as investors hesitate to finance the construction of new mines.