Gold prices are edging closer to the $3,000 milestone, extending their impressive upward trend. While many analysts expect further gains, some warn that potential obstacles could halt the momentum.

Key Drivers Behind Gold’s Surge

Gold has delivered strong returns for investors. After a 26% increase in 2023, prices have already climbed an additional 12% in 2024. In late February, gold briefly touched the $3,000 mark before pulling back. However, even recent turbulence on Wall Street failed to shake confidence. On Thursday, gold set a new record at $2,989 per ounce.

One of the primary forces behind this surge is the aggressive gold-buying strategy of central banks in emerging markets. After Western nations froze Russia’s foreign reserves following the Ukraine war, many countries sought alternative stores of value. Gold became a top choice.

Compared to Western economies, emerging market central banks hold relatively small portions of their reserves in gold. China currently allocates 5.5% of its reserves to gold, while India holds 11.4%. In contrast, the U.S. maintains 74.9%, with Germany holding a similar proportion.

If China were to increase its gold reserves to 30–40%, it would require a volume far exceeding annual global production. This massive demand has provided strong support for rising prices.

Are There Risks to Gold’s Upward Trend?

Despite the optimism, some market experts caution that certain developments could slow the rally. Diego Franzin, portfolio manager at Plenisfer Investments, points to geopolitical factors that could shift market dynamics.

A potential ceasefire in Ukraine could remove two key drivers of gold demand. First, investors traditionally turn to gold in times of crisis. If geopolitical tensions ease, demand as a safe-haven asset may decline. Second, if Russia regains access to its frozen reserves, central banks may reduce their gold purchases.

Franzin also highlights competition from other asset classes. Higher U.S. Treasury yields could attract investors away from gold. Additionally, a strong rebound in China’s stock market could divert capital toward equities instead of precious metals.

Still, he expects gold’s long-term appeal to remain strong. “Gold is becoming increasingly essential in investment portfolios,” Franzin says. “We do not anticipate this trend reversing anytime soon—if anything, it will strengthen further.”

The rising demand for gold-backed exchange-traded funds (ETFs) supports this outlook. These ETFs saw their highest inflows since 2022, helping drive gold’s latest record before the recent pause below $3,000.

Future Prospects: More Growth Ahead?

Uncertainty surrounding U.S. trade policies under President Donald Trump has further increased gold demand. Investors remain concerned about Washington’s shifting stance on Russia’s involvement in Ukraine. Meanwhile, China’s decision to allow insurance companies to invest in gold could push demand even higher.

“This new policy will significantly boost China’s gold consumption,” says Charlotte Peuron, a fund manager at Crédit Mutuel.

Goldman Sachs has raised its price forecast, citing strong central bank demand. The investment bank now expects gold to reach $3,100 per ounce by the end of the year. If this prediction holds, it would mark another year of major gains, extending gold’s 75% surge since its 2022 low of $1,650.

With supply remaining tight and demand growing, gold’s bullish trend seems far from over. However, investors will be closely monitoring global developments that could either extend or disrupt the rally.