Gold's Bull Run: Persisting into 2025

Gold's bull run, which began in 2020, has shown no signs of abating, with most banks expecting the precious metal's ascent to continue into 2025. This article explores the key factors driving gold's price trajectory and the consensus among financial institutions regarding its future prospects.




Central bank purchases and geopolitical risks have been significant contributors to gold's bull run. Central banks, particularly those in emerging markets, have been actively buying gold to diversify their reserves and hedge against currency risks. In 2024, central bank gold purchases are expected to triple the amount bought in previous years, according to Goldman Sachs Research. This increased demand, coupled with geopolitical uncertainties, has pushed gold prices to record highs.




Interest rate cuts by the Federal Reserve have also played a crucial role in gold's price trajectory. Lower interest rates make gold, a non-yielding asset, more attractive to investors. As the Fed is expected to cut rates in late 2024 and early 2025, gold prices are forecast to reach new highs. J.P. Morgan Research estimates that gold prices could average $2,500/oz in the fourth quarter of 2024 and $2,600/oz in 2025.




Gold's decoupling from U.S. real yields has been another significant development in its bull run. Traditionally, gold prices have moved in tandem with U.S. real yields. However, this relationship has broken down in recent years, with gold prices surging despite higher real yields. This decoupling can be attributed to increased demand from central banks and emerging markets, as well as heightened geopolitical risks.




The key structural bullish drivers for gold include central bank purchases, geopolitical risks, and interest rate cuts. As these factors are expected to remain in place, gold's bull run is likely to persist into 2025. While there may be short-term fluctuations, the long-term outlook for gold prices remains positive. Investors should consider allocating a portion of their portfolios to gold to hedge against risks and participate in its potential upside.