Gold prices are set to maintain their rally through 2025, according to UBS analysts, driven by two pivotal factors: declining interest rates and ongoing geopolitical risks. These dynamics are expected to solidify gold’s reputation as a safe-haven asset while capitalizing on favorable global economic conditions in the year ahead.
Declining Interest Rates Boost Gold’s Appeal
The primary driver of rising gold prices is the anticipated decline in interest rates. UBS projects that central banks worldwide will adopt more accommodative monetary policies to counter subdued inflation and slow economic growth. This shift typically reduces the appeal of yield-bearing assets like bonds, making gold—an asset without yield—a more attractive option for investors seeking stability and long-term value.
As yields in traditional asset classes decrease, UBS forecasts a significant increase in capital flows into gold, further driving up its value. The lower opportunity cost of holding gold during periods of falling interest rates is a well-established trend that UBS believes will persist into 2025.
Geopolitical Risks Support Gold as a Safe Haven
Geopolitical uncertainty is another major factor underpinning gold’s strength. Heightened tensions in regions like Eastern Europe and the Middle East, coupled with concerns over U.S. government debt and fiscal deficits in major economies, are creating a robust demand for gold as a reliable store of value during volatile times. UBS highlights that risks associated with global trade disruptions and fiscal challenges in developed nations further enhance gold’s allure as a hedge against uncertainty.
Structural Trends Favour Gold in the Long Term
Beyond the immediate drivers, UBS identifies several structural trends supporting gold prices over the medium to long term. The increasing demand for metals used in renewable energy projects is expected to intersect with the demand for gold, creating overlapping dynamics that support its value. Additionally, shifts in the global economic landscape, including deglobalisation and demographic changes, are likely to sustain gold’s position as a critical investment asset.
Conclusion
With the dual influence of lower interest rates and persistent geopolitical risks, combined with broader structural trends, UBS predicts that gold will continue its upward trajectory in 2025. Investors are increasingly turning to gold not only as a safe haven but also as a strategic asset in a rapidly evolving economic environment.
(Sources: investing.com, reuters.com)
