Global Gold Prices: A Comprehensive Understanding of Factors and Developments

Gold is one of the oldest precious metals used by humans as a means of storage and hedging against economic risks. Gold is typically measured in troy ounces (31.10 grams). It is traded in global financial markets under the symbol XAU and priced in US dollars per ounce.

In global commodity exchanges such as COMEX or the London Metal Exchange, the price of gold is determined daily through the supply and demand mechanism in futures and spot contracts. Gold is not only considered a traditional industrial commodity but is also classified as a safe-haven financial asset sought by investors during times of economic or geopolitical uncertainty. In the Saudi financial market, there is no separate index for gold, but monitoring global gold prices has become essential for understanding the movements of related sectors, especially mining companies.

It is worth noting that the price of gold continuously changes in response to global economic events and is used as a benchmark for comparison with other currencies, as it can typically only be traded against the US dollar. This makes monitoring global gold prices vital for investors looking to diversify their portfolios or hedge against market risks.

Global gold prices experienced unprecedented rises during 2024 and 2025, with the price of gold futures reaching approximately $2,717.8 per ounce in February 2025, marking the highest value since December 2024 when it exceeded $2,756.7 per ounce. These price jumps were accompanied by significant economic factors, most notably the decline in the value of the US dollar and slowing inflation in the United States.

Data from the US Bureau of Labor Statistics showed that the core inflation rate (CPI) for December 2024 was 3.2%, lower than expected, which bolstered expectations for a reduction in interest rates by the US Federal Reserve later in 2025. This coincided with a drop in the US Dollar Index (DXY) to 109.1 points, enhancing gold's appeal as an investment haven, especially amid the weakening US currency.

Global gold prices at certain times in the first quarter of 2025 surpassed historical levels of $3,000 per ounce. Annually, gold ended 2024 with gains of nearly 26%, the highest since 2010, supported by radical changes in monetary policies and increasing demand from central banks and institutional investors worldwide.

Global gold prices are influenced by several key economic factors:

1. Inflation: Rising inflation drives investors to seek safe havens like gold, which is viewed as a store of value when the purchasing power of currency declines.

2. US Interest Rates: Increasing interest rates typically lead to a decline in gold prices, as yield-bearing assets become more attractive. Conversely, lowering interest rates supports gold prices.

3. Strength of the US Dollar: There is an inverse relationship between the dollar and gold. When the dollar weakens, gold becomes cheaper for holders of other currencies, increasing demand.

4. Geopolitical Crises: Wars, conflicts, and political instability drive investors to purchase gold as a safe haven.

5. Central Bank Policies: The buying or selling of gold reserves by central banks directly affects its price.

6. Global Supply and Demand: Changes in gold mine production or industrial demand (especially in Asia) impact global prices.

These factors converge to determine the short- and long-term trends of gold prices, making their monitoring essential for understanding global market dynamics.

Gold is priced globally in US dollars, creating a close relationship between the two. Typically, gold and the dollar exhibit an inverse relationship: when the dollar rises due to tight monetary policies or strong economic data, demand for gold declines, leading to a drop in its price. Conversely, a weaker dollar increases gold's appeal, especially for investors outside the United States.

During 2024-2025, the US Dollar Index experienced relative declines, driving global gold prices to historic levels. This change had a direct impact on the decisions of global investors, who turned to gold as an alternative to the dollar amid expectations of US interest rate cuts and a weakening currency. Therefore, monitoring dollar movements is a fundamental tool for predicting gold trends in the short to medium term.

Additionally, local exchange rates (such as the Saudi riyal pegged to the dollar) affect the cost of purchasing gold in local markets, reflecting the importance of the relationship between gold and the dollar in both emerging and developed markets.

The monetary policies of central banks, particularly the US Federal Reserve, are among the most significant determinants of global gold price trends. When the central bank raises interest rates to combat inflation, yield-bearing assets (such as deposits and bonds) become more attractive compared to gold, which does not generate fixed income, typically leading to a decline in its price.

Conversely, when the central bank lowers interest rates or hints at easing monetary policy, gold becomes more appealing as a safe haven against currency depreciation and inflation. In 2024, expectations of US interest rate cuts supported gold prices, especially as inflation indicators in the US slowed. The market anticipated a reduction of about 40 basis points by the end of 2025, bolstering investment demand for gold.

Gold prices are also influenced by the policies of other central banks, especially in Europe and Asia, where the purchase of gold reserves by these entities increases global demand and supports prices.

Gold plays a prominent role as a safe haven during geopolitical crises, with demand increasing as international tensions rise. In 2024 and 2025, tensions escalated in several regions worldwide, such as the war in Ukraine and rising conflicts in the Middle East, leading to strong waves of gold purchases.

Political and economic instability typically drives investors to hedge through gold, given this metal's ability to retain its value amid fluctuations in financial markets. During crises, capital may flow from high-risk assets (such as stocks) into gold, causing its price to rise rapidly.

Additionally, central bank decisions to purchase gold as part of their reserves often come in the context of seeking financial stability during periods of uncertainty, supporting global demand for gold and raising its prices.

Gold has long been considered a safe haven sought by investors during periods of severe volatility or economic crises. The primary reason is that gold is not directly tied to the performance of companies or governments, retaining its value over the long term, even during periods of inflation or economic recession.

Gold does not provide periodic returns like stocks or bonds; instead, its return depends on market price changes. During financial crises or currency weakness, demand for gold as a hedge increases, raising its global price.

During 2024-2025, investment demand for gold rose significantly amid growing fears of recession or escalating geopolitical tensions, leading to new record prices. Gold is also viewed as a tool for portfolio diversification and risk reduction, especially in an unstable economic environment.

Despite the lack of an official market for trading gold as an independent asset in the Saudi financial market (Tadawul), global gold prices indirectly affect some local sectors and companies. A prominent example is the Saudi Arabian Mining Company (Ma'aden), which has gold exploration projects as part of its activities in the basic materials sector.

When global gold prices rise, the profitability of mining companies improves, positively reflecting on their financial valuation in the Saudi market. However, direct investment in gold through Tadawul is not available, limited to purchasing bullion or gold coins from banks or through global investment funds.

Moreover, Saudi investors monitor gold prices as a tool to hedge their portfolios against inflation or currency fluctuations. Given the peg of the Saudi riyal to the dollar, changes in the dollar affect the cost of purchasing gold locally, enhancing the importance of monitoring global gold price developments for Saudi investors.

The Saudi Arabian Mining Company (Ma'aden) is the most prominent example of local companies affected by global gold price performance. Ma'aden participates in gold exploration and production projects (such as the Wa'ad Al Shamal mine), and rising global prices positively impact its revenues and profitability.

Ma'aden is listed in the basic materials sector on Tadawul under the symbol 1211, and gold price movements are one of the main influencing factors on its business results, alongside other metal prices. Rising gold prices improve profit margins and enhance the company's ability to expand its exploration projects.

However, investing in mining company stocks is not considered a direct investment in gold, as the performance of these companies depends on additional factors such as operational efficiency, cost management, and other metal prices. Nonetheless, gold remains an important indicator for tracking the performance of Saudi mining companies within the local financial market.

Saudi investors cannot purchase gold directly through the Tadawul stock exchange, but there are several options for investing in gold:

1. Buying bullion and gold coins from banks or accredited gold shops.
2. Investing in gold exchange-traded funds (ETFs) listed on global exchanges.
3. Trading gold contracts for difference (CFDs) through international brokerage firms.
4. Purchasing shares of gold mining companies like Ma'aden (symbol 1211).

It is important to note that each of these options carries different levels of risk and trading fees, and none provide fixed returns like bonds or dividend-paying stocks. Investors are always advised to consult a licensed financial advisor before making any investment decisions in gold, given the price volatility of the metal and the absence of periodic income.

In global commodity markets, gold is one of the most important investment assets, but it faces competition from other metals and assets such as silver, platinum, and strong foreign currencies (like the Japanese yen and Swiss franc), in addition to US bonds and cryptocurrencies like Bitcoin.

Silver and platinum are direct competitors to gold as safe havens and often move in parallel with gold prices during times of crisis. Strong foreign currencies and long-term government bonds attract investors seeking safety in an unstable economic environment.

In recent years, cryptocurrencies have emerged as a modern alternative to gold, despite their extreme volatility. Nevertheless, gold remains the preferred choice for many traditional investors due to its long history as a store of value and its relative stability compared to emerging assets.

Gold ended 2024 with unprecedented annual gains of approximately 26%, the highest since 2010. The price per ounce reached $2,790 at the end of December 2024, exceeding most previous expectations. During the first quarter of 2025, prices surpassed the $3,000 per ounce mark for the first time, confirming the ongoing upward trend amid global crises and expectations of monetary policy easing.

Prices rose alongside increased purchases by central banks, especially in Asia and Russia, and a rise in hedging by institutional investors. This strong performance is attributed to declining US inflation and expectations of interest rate cuts, along with disruptions in financial and stock markets.

These data reflect the importance of gold as an indicator of the global economic situation and its role as a hedging tool during times of instability. Price volatility is expected to continue, necessitating close monitoring of the economic and political factors influencing the market.

Despite the advantages of gold as a safe haven, investing in it carries certain risks that investors should consider:

1. Price Volatility: Gold may experience sharp declines when demand decreases or economic conditions improve.
2. Absence of Periodic Returns: Gold does not provide regular profits or interest, making it less attractive during periods of rising interest rates.
3. Storage and Insurance Costs: Holding physical gold incurs additional costs for protection.
4. Liquidity Risks: Selling physical gold may take time and involve high commissions.
5. Tax Implications: Investors may face taxes when selling gold.

For these reasons, investors should assess their financial goals and risk tolerance, and not rely on gold as a fixed income source, but rather view it as part of a diversified investment strategy.

Current indicators suggest that global gold prices may continue to move within high levels amid ongoing supportive factors such as expectations of US interest rate cuts, continued geopolitical tensions, and increased central bank purchases.

According to reports from global financial institutions (such as Citi), gold may see further increases if crises persist or if the US dollar weakens significantly. However, any notable improvement in the global economy or a sharp rise in US interest rates could slow the pace of gold price increases or push them to decline.

It remains important for investors to closely monitor economic and political news and consult a licensed financial advisor before making any investment decisions in gold or other commodities, given market volatility and the difficulty of accurately predicting future prices.