A deep dive into gold’s predicted performance and market drivers makes it clear that it’s a winner. As we approach 2025, the outlook for gold remains positive, building on its strong performance in 2024. Last year, gold prices increased by over 27 per cent, marking the most significant annual gain since 2010. This upward trend has been driven by several factors, including geopolitical uncertainty, inflationary pressures, and rising demand from both investors and central banks. Historically, gold has proven to be a reliable hedge against economic instability, and its recent performance highlights its importance as a key asset within diversified portfolios.
Gold reached an all-time high of $2,790 per ounce in October 2024, driven by several key factors, including geopolitical tensions in the Middle East and Ukraine, as well as easing monetary policies from various central banks. Sriram Iyer, Senior Analyst at Reliance Securities, states: “Factors such as trade disputes involving China, nearly 700 tonnes of central bank purchases, and a shift by investors seeking safety amid elevated inflation prompted increased interest in gold.” Heightened geopolitical risks, particularly related to the ongoing Russia-Ukraine conflict and escalating tensions in the Middle East, have further fuelled demand for safe-haven assets like gold.
Dr Narayani Ramachandran, Director and Professor of Finance at NMIMS Bengaluru, noted: “The geopolitical realignment, marked by strengthening alliances among BRICS-plus nations, has led to a heightened focus on gold as a hedge against sanctions and currency volatility. The BRICS-plus countries – now accounting for 43 per cent of global oil production and 44 per cent of global oil reserves – are exploring new economic structures that could challenge the dominance of the US dollar. A shift towards gold-backed trade agreements or commodity pricing could further bolster gold demand.”
According to Manish Chowdhury, Head of Research at StoxBox: “We believe the current geopolitical tensions (involving Russia-Ukraine and Israel-Hamas) will be better managed moving forward, but we do not rule out the possibility of new issues arising from other regions. The ongoing purchasing activity by global central banks is likely to continue, providing additional support to gold prices.”
Chowdhury adds: “With inflation seemingly on a downward trajectory, we believe that the period of tight monetary policy is behind us, and we should expect a gradual shift towards a looser policy stance by major global central banks in 2025. The only area of uncertainty, particularly in the currency markets, is China’s policy response to various economic challenges and potential retaliation against likely trade tariffs from the US.”
Weakening of US dollar
In Q3 of 2024, lower yields and a slight weakening of the US dollar led to increased investment flows into gold ETFs, contributing to the rise in gold prices. According to the World Gold Council, total gold demand in Q3 exceeded $100 billion for the first time. Adds Sriram: “Looking ahead to 2025, we maintain a bullish outlook for gold. Key factors contributing to its continued appreciation include easing monetary policies from various central banks, particularly the Federal Reserve and the European Central Bank.”
The price of gold is expected to continue rising in 2025, although the extent of this increase will depend on the evolving world order shaped by the policies of the Trump administration and geopolitical uncertainties. Chowdhury believes that, with the Trump administration poised to take control soon, his proposed tariffs and protectionist policies will largely influence short-term gold prices. “These policies are likely to fuel inflation and could potentially lead to trade wars,” adds Chowdhury.
According to Yashovardhan Khemka, Senior Manager of Research & Analytics at Abans Holdings, Donald Trump’s return to the presidency is set to shape the economic landscape in 2025. His administration’s potential for increased fiscal spending and protectionist policies could create a sustained inflationary environment. While these measures may enhance the long-term attractiveness of gold, the outlook for interest rates adds complexity.
Persistently ‘sticky’ inflation, combined with sluggish economic growth, has prompted policymakers to adjust their interest rate forecasts. Instead of the initially expected 100 basis points in cuts, only 50 basis points of reduction are now anticipated, which may exert some downward pressure on gold prices in the short term.
Yashovardhan adds: “Some investors may redirect their funds to cryptocurrencies due to Trump’s expected push for deregulation, which could introduce volatility in gold prices. On a positive note, ongoing geopolitical risks are driving demand for gold. Conflicts around the world have heightened tensions, prompting central banks to diversify their reserves by increasing their gold holdings. This strategy reduces reliance on the US dollar and mitigates risks associated with geopolitical instability.”
Sriram added: “The Federal Reserve has indicated a less aggressive stance for 2025 compared to previous projections. Interest rates from central banks will likely be lower than during the Covid-19 era, which will support price increases. Potential disruptive US policies under President Trump, along with other economic factors, will also bolster expectations for further gains in the price of gold.”
Emerging markets are expected to play a significant role in sustaining gold demand. Currently, these economies account for approximately 50 per cent of global GDP, an increase from 19 per cent in 2000. Additionally, emerging markets contributed to two-thirds of global GDP growth over the past decade. Cultural and historical preferences for gold as a store of value amplify this trend, particularly in countries like China and India, which together represent over half the annual physical gold demand.
Central banks in emerging markets have been accumulating substantial amounts of gold in response to geopolitical tensions and currency risks. For instance, the People’s Bank of China has increased its gold reserves for 18 consecutive months as part of the BRICS-plus nations’ broader strategy for de-dollarisation.
Inflationary pressures
The trend towards de-dollarisation is evident, with countries such as China and Russia seeking alternatives to the US dollar. This shift enhances the relevance of gold as a neutral reserve asset. Since 2022, central bank purchases have created a price floor that helps stabilise gold amid external market volatility. This dynamic could lead to a potential commodity shock, characterised by political actions that restrict oil, natural gas, or critical metals, resulting in inflationary pressures. History shows similar patterns, as seen during the oil embargo of the 1970s. As a reliable systemic hedge, gold is increasingly viewed as a protective asset.
It is anticipated that central banks will continue purchasing gold throughout the year, further bolstering its price. Although investor participation in gold has decreased compared to previous levels, there is potential for prices to strengthen as more investors seek exposure to gold.
Yashovardhan points out that “while gold prices are likely to rise from current levels, a possible delay in interest rate cuts could result in short-term declines to levels of $2,580 per ounce and even $2,520 per ounce. However, these dips may present opportunities to acquire gold at more attractive prices. Overall, we believe that gold will continue to be a valuable asset for portfolio diversification, and we expect prices to reach $2,700 to $2,800 per ounce by 2025.”
Beyond 2025, analysts anticipate continued strength in gold demand. Some forecasts suggest that prices could approach $7,000 per ounce by 2030, driven by structural economic shifts and persistent inflation. Gold’s historical role as a crisis asset ensures its ongoing relevance in investment portfolios, especially as global debt levels rise and financial repression becomes more common.
Dr Narayani Ramachandran explains: “In a nutshell, the future performance of gold in 2025 will likely be influenced by emerging markets and geopolitical challenges. There is increasing demand from central banks, efforts to de-dollarise, and growing tensions among countries, which make gold a safe-haven asset. When these elements align, gold can serve as a stabilising force within the global financial system.”
Ongoing geopolitical tensions, stronger central bank demand, and deteriorating financial conditions are expected to persist, driving demand for gold as a safe-haven asset. Following strong performance in 2024, gold is expected to continue its upward trajectory in 2025, although at a slower pace compared to the previous year. Experts forecast that gold prices could reach $3,000 per ounce, with an average range between $2,550 and $2,600 per ounce in 2025.