Gold Outlook 2025: Will the Yellow Metal Keep Shining?

TradingKey - Gold is always revered as a hedge against inflation and an asset that holds up well in times of uncertainty. After an extraordinary 2024, where gold soared by 27% – its best performance since 2010 – the stage is set for what could be another glittering year. 

With prices hitting record highs of over US$2,500 per troy ounce, the safe-haven asset has been the go-to choice for central banks, institutional investors, and those seeking stability amid global uncertainty. 

As we head into 2025, the big question remains: can gold keep its momentum, or is a correction on the horizon? Here’s a closer look at the forces driving gold’s trajectory and what investors can expect in the year ahead.

2024: Golden year in review

Gold’s stellar performance in 2024 was sparked off by a perfect storm of macroeconomic and geopolitical factors. Central banks led the charge, with major players like China aggressively diversifying away from the US dollar by adding to their gold reserves. Indeed, China’s central bank expanded its gold reserves in November, after a six-month pause in purchases.

Geopolitical hotspots, including the ongoing war in Ukraine and rising tensions in the Middle East, have been a big driver of demand for gold as a safe haven asset.

On the economic front, cooling inflation and an anticipated pivot by the Federal Reserve (Fed) kept interest rates relatively stable, reducing the opportunity cost of holding non-yielding assets like gold. These conditions created an ideal backdrop for gold to shine.

Key drivers for gold in 2025

Central bank demand

Central banks have been net buyers of gold for the past 13 years, but 2024 broke records. Nations like China, India, and Russia have ramped up purchases as they seek to diversify away from the US dollar given the “weaponisation” of the dollar by the US – as it relates to sanctions.

This trend shows no signs of slowing in 2025. With geopolitical tensions and economic uncertainties persisting, central banks are expected to remain active in the gold market, providing a solid foundation for prices and even further potential to gain.

Geopolitical instability

Gold thrives in times of uncertainty, and 2025 is shaping up to deliver plenty of it. The conflict in Ukraine continues to weigh on Europe, while ongoing tensions in the Middle East add another layer of unpredictability and volatility. 

Moreover, global political shake-ups, such as leadership changes in Europe and shifts in US-China relations under Trump’s trade policies, could send shockwaves through financial markets. All this will boost demand for gold as a safe-haven asset.

Federal Reserve and inflation

The Federal Reserve’s monetary policy will be a key factor in determining gold’s trajectory. While markets expect the Fed to cut rates in 2025, recent signs of stickier-than-expected inflation could lead to a more cautious approach – especially if president-elect Trump’s tariff policies end up being inflationary. 

If the Fed adopts a slower pace of easing, gold could remain attractive due to its role as an inflation hedge. On the flip side, if inflation surprises to the upside or the Fed opts for more aggressive cuts, gold could see heightened volatility.

Economic policies under Trump

President-elect Trump’s economic agenda, including tariffs, tax cuts, and infrastructure spending, is expected to exert inflationary pressures. 

Historically, gold has performed well during periods of higher inflation, as investors flock to it to preserve purchasing power. Additionally, uncertainties surrounding the US budget deficit – which Trump’s spending plans could balloon significantly – may also weaken confidence in fiat currencies (such as the US Dollar), indirectly boosting gold’s appeal.

How high can gold go?

The outlook for gold in 2025 remains highly optimistic, with analysts projecting record-breaking prices by year-end. Forecasts suggest gold could climb as high as US$3,000 per troy ounce, driven by robust central bank demand, escalating geopolitical risks, and persistent inflationary pressures. 

Even with the US dollar maintaining some of its strength, gold’s appeal as a hedge against economic uncertainty and its role in central bank diversification are expected to support its upward momentum. Estimates in the market place gold trading within a range of US$2,450 to US$3,000 per troy ounce, underscoring its strong demand and favourable macroeconomic conditions.

What could derail gold’s rally?

While the outlook is bright, some risks could dampen gold’s shine:

1. Stronger US Dollar: If the dollar continues its 2024 rally and remains strong throughout 2025, it could reduce demand for gold, particularly in emerging markets.
2. Global economic recovery: A synchronised recovery in Europe, Asia, and emerging markets could shift investor focus away from safe-haven assets like gold.
3. More aggressive Fed easing: If the Fed cuts rates faster or deeper than expected, it could increase risk appetite, reducing the allure of gold.

The path forward: Is gold still a buy?

Gold has once again proven its worth as a cornerstone of diversified portfolios, and 2025 is likely to reinforce its status as a go-to asset in times of uncertainty. Despite potential headwinds, the case for gold in 2025 remains compelling. 

Central bank demand is expected to stay robust, geopolitical tensions show no signs of abating, and Trump’s inflationary economic policies could provide additional tailwinds. For investors, gold offers not only a hedge against volatility but also a way to diversify portfolios amid a complex global environment. 

While prices may experience short-term fluctuations, the long-term drivers of demand suggest that gold’s shine is far from fading.