Introduction

The price of gold is set to rise further in 2025, building on last year’s impressive 27% rally. Analysts from Wall Street banks forecast that the precious metal will climb to approximately $2,795 per troy ounce by the year’s end—representing a 7% increase from current levels. Key drivers include continued central bank purchases, declining US interest rates, and geopolitical uncertainties.

Central Banks Diversify Reserves

Central banks across the globe have been actively increasing their gold reserves to reduce reliance on the US dollar. This trend accelerated following sanctions imposed on Russia after its 2022 invasion of Ukraine. The People’s Bank of China, for instance, resumed gold purchases in late 2024 after a six-month pause, contributing to global central bank acquisitions of 694 tonnes of gold during the year’s first nine months.

Interest Rates and Inflation Influence

Lower US interest rates have played a significant role in gold’s recent rally. As a non-yielding asset, gold benefits from reduced opportunity costs when interest rates fall. Analysts anticipate further rate cuts in 2025, although at a slower pace than previously expected. The election of Donald Trump and his expected fiscal spending plans could also drive inflation, weaken the US dollar, and bolster gold prices.

Expert Forecasts Vary

Opinions differ on how far gold prices will rise. Goldman Sachs provides the most optimistic outlook, predicting a peak of $3,000 per troy ounce by the end of 2025. In contrast, Barclays and Macquarie present more conservative estimates, expecting prices to drop to around $2,500 due to initial pressure from a strong US dollar.

The World Gold Council expects positive, albeit more modest, growth this year. Meanwhile, Société Générale forecasts that geopolitical tensions, combined with momentum from 2024, could push prices to $2,900 by year-end.

Geopolitical Tensions Add to Appeal

Ongoing conflicts in Ukraine and the Middle East continue to drive demand for gold as a safe-haven asset. Rising government debt levels and economic uncertainty under the Trump administration are additional factors likely to keep the metal’s value high.

Henrik Marx of Heraeus Precious Metals suggests that central bank buying will provide a strong foundation for gold’s demand, with prices potentially reaching $2,950 per troy ounce in 2025.

Conclusion

Gold remains a cornerstone of financial stability in uncertain times, supported by central bank purchases, falling interest rates, and global geopolitical issues. While predictions vary, the consensus points to steady, albeit slower, growth this year. For investors, gold remains a vital asset class for hedging against economic and political instability.

Source: (FT.com)