Gold Price Rally Set to Continue in 2025

Gold prices have been on a tear in 2024, surging over 27% – the strongest annual gain since 2010. As we look ahead to 2025, many analysts and investors are wondering if this rally will continue. Based on the current macroeconomic backdrop and geopolitical landscape, I believe that gold prices are poised to remain elevated and potentially even reach new highs in the coming year.



One of the primary drivers of gold's rally in 2024 has been increased investment from central banks globally. Central banks have been net buyers of gold, adding 396.7 tonnes to their reserves in 2024 alone. This trend is expected to continue in 2025, as central banks seek to diversify their foreign reserves and hedge against geopolitical risks and currency fluctuations. ING Think, the economic and financial analysis wing of Dutch multinational financial services firm ING, forecasts that gold prices will average at $2,500/oz in 2025, with prices still being supported in the coming months.



Another key factor driving gold prices higher is the Federal Reserve's interest rate policy. Lower interest rates and bond yields make gold more attractive as an investment option, as it does not offer a yield. This has led to increased inflows into gold ETFs, which have seen record-breaking inflows in 2024. BMI Research expects the Fed to cut interest rates by a cumulative 125 basis points to 3.50% by the end of 2025, which could support gold prices further.

Geopolitical tensions and global economic uncertainty are also expected to continue influencing gold demand in 2025. The Australian Office of the Chief Economist (AOCE) predicts that gold prices will remain elevated in 2025 before falling slightly in 2026, citing safe-haven demand for gold as a key driver. ING Think also expects geopolitical tensions and the economic climate to keep central banks as buyers of gold in the longer term.



However, it is essential to acknowledge the potential risks and challenges that could impact gold prices in 2025. The incoming Trump administration's policies could lead to fewer rate cuts than previously expected, which could limit interest rate cuts from the Federal Reserve in the longer term. Additionally, changes in geopolitical dynamics or a significant improvement in global economic conditions could reduce safe-haven demand for gold.

In conclusion, the macroeconomic backdrop and geopolitical landscape suggest that gold prices are likely to remain elevated and potentially reach new highs in 2025. Central bank gold purchases, Federal Reserve interest rate policy, and geopolitical tensions are expected to continue driving gold demand. However, investors should remain cautious and monitor the evolving macroeconomic and geopolitical landscape for any changes that could impact gold prices. As always, it is crucial to conduct thorough research and consider your risk tolerance before making any investment decisions.