As we examine what may happen in the new year, it is clear that gold continues to be of interest for investors seeking stability, diversification, and opportunities amidst what is likely to be an interesting and changing economic landscape throughout 2025. 

With a change in the US presidency, significant central bank action likely, and on-going geopolitical concerns likely to rumble on, may all have significant impact on markets generally including, of course, what may happen to precious metals.

This article explores the potential trajectory of gold prices in the upcoming year by examining these key factors driving its value, the headwinds and tailwinds shaping its path, and what the current state of gold indicates for its future.

 

The Current State of Gold

Gold has been on a dynamic journey in recent years, reacting to a mix of macroeconomic pressures and geopolitical events. As of now, and after hitting record highs late October just beneath $2,800, gold futures prices are approximately $2,700 per ounce, remaining in long-term uptrend, and reflecting a year of relative volatility influenced by central bank policies and persistent inflation concerns.

Inflation in the U.S. remains elevated, with the Consumer Price Index (CPI) year-over-year as of late 2024. Although down from the 9.1% peak in 2022, inflation pressures are still stubbornly above the Federal Reserve’s 2% target, and appear to have paused at the current time. This persistent inflation has encouraged some investors to allocate capital into gold as a hedge, contributing to its stability.

In 2024, gold’s performance was shaped by factors such as the Federal Reserve’s interest rate hikes, geopolitical tensions like the ongoing Russia-Ukraine and Middle-east conflicts, and strong central bank purchases. 

These elements set the stage for 2025, where uncertainties around monetary policy, global stability, and demand dynamics will likely play crucial roles.

 

What Moves Gold Prices — Key Drivers to Watch

Gold’s value is influenced by a combination of fundamental and technical factors. Here’s a deeper dive into the primary drivers:

1. Macroeconomic Influences
   Gold’s price tends to rise during periods of high inflation or economic uncertainty. Historically, during the stagflation of the 1970s, gold surged as investors sought protection against eroding purchasing power. Conversely, rising interest rates often reduce gold’s appeal, as seen in the early 1980s when rates reached double digits, causing gold prices to decline.
2. Geopolitical Events
   Gold is a classic safe-haven asset, often gaining during periods of global instability. For instance, during the 2008 financial crisis, gold prices spiked as investors fled riskier assets. Similar behaviour was observed during the early months of the COVID-19 pandemic in 2020. More recently events in the Middle East saw more gold buying in 2025.
3. Currency Dynamics
   Gold typically moves inversely to the U.S. Dollar. A strong dollar, as seen in 2022, can suppress gold prices, while a weaker dollar, such as during the 2010-2012 period, supports gold’s rise. The US is rising again on a perception that further rate cuts in 2025 are less likely than perhaps thought a couple of months ago.
4. Supply and Demand Fundamentals
   Supply-side factors, including mining output, have remained relatively stable in recent years. On the demand side, central bank purchases hit record highs in 2023, with countries like China and Turkey significantly increasing their reserves. The World Gold Council reported that central banks purchased over 1,000 tonnes of gold in 2023, the largest annual total since records began in 1950. Notably, China added over 200 tonnes to its reserves, reflecting its strategy to diversify away from the U.S. Dollar. Jewellery demand from India and China remains another part of gold’s value although arguably less so than perhaps other factors discussed above.
5. Industrial and Technological Use
   Gold’s role in electronics and green energy technology, such as photovoltaic cells in solar panels, continues to grow, adding a layer of industrial demand. However the new US administration that will be in place from January, appears to be less keen on renewable energy which may curb this to some degree 

 

Headwinds for Gold in 2025

While gold has potential for growth, several challenges could limit its upside:

• Rising Interest Rates: If central banks, particularly the Federal Reserve, maintain or further increase rates, the opportunity cost of holding gold becomes higher. Higher rates make bonds and savings accounts more attractive compared to non-yielding assets like gold.
• Strong U.S. Dollar: A resilient dollar, supported by higher interest rates or strong U.S. economic performance, typically reduces gold’s appeal for international buyers. The U.S. Dollar Index (DXY) remained strong in 2024, trading above 105 for much of the year.
• Equity Market Resilience: A robust stock market could divert capital away from safe-haven assets like gold. For example, during the tech boom of the late 1990s, gold underperformed as investors flocked to equities.
• Geopolitical Stability: If global tensions ease, the safe-haven demand for gold may diminish. Stable geopolitical conditions often correlate with a decline in gold prices, as seen during the mid-2010s. However at this stage, there are several potentially volatile situations that may be of impact through next year.  

 

Tailwinds for Gold in 2025

Several factors could bolster gold’s performance:

• Inflation Pressures: Persistent inflation, even if moderated from 2024 levels, could drive demand for gold as a hedge. Historical parallels can be drawn to the 1970s, when inflation pushed gold to record highs. For instance, gold surged from $35 per ounce in 1971 to over $600 by 1980 as inflation spiralled out of control. The new Trump administration continues to 
• Central Bank Buying: Central banks added nearly 1,000 tonnes of gold to their reserves in 2023, a trend likely to continue in 2025. This significant demand underpins long-term price stability. Countries like Turkey and China remain active buyers, viewing gold as a hedge against currency devaluation and geopolitical risks.
• Market Volatility: Heightened risks, whether from an economic slowdown or geopolitical shocks, could renew safe-haven flows into gold. With the follow through and potential impact of some of the new US government policies as yet unknown but “promised” during pre-election, there is the narrative that these may dampen down growth in the short term. Of course, there is an often wide disparity between pre-election promises and reality and the underlying economic metrics, both in terms of data and the recent overperformance of US company earnings (over 75% beating expected EPS), are suggesting that any fall off is unlikely). 
• Weaker U.S. Dollar: If the Federal Reserve continues with the late 2024 approach to rate cuts, the dollar is likely to weaken, supporting gold prices. However, the decreasingly “dovish” narrative that has been prevalent in the last few weeks suggest a potential pause in rate cut action during early 2025.

 

Technical Analysis: Where is Gold Headed?

From a technical perspective, gold’s price action will be pivotal in determining its outlook:

• Support Levels: Key support zones around $2.600 and more importantly perhaps the mid-November low of $2,535 will be crucial in maintaining bullish sentiment. A breach of the latter is likely to suggest a change in longer term trend and could precipitate more selling pressure.
• Resistance Levels: Overcoming previous highs at $2,800 could open the door to new highs, with $3,99 as the next significant target both technically and psychologically for markets.

 

Forward-Looking Analysis: the FIVE key questions

Breaking down the above into the key questions that will shape gold’s outlook in 2025:

1. Will the Federal Reserve continue to cut interest rates, or will inflation remain stubbornly higher than desired (particularly influenced by any “Trump Tariffs”) support USD strength and derail the current trajectory of inflation? 
2. Could geopolitical risks resurface, reigniting demand for safe-haven assets including gold?
3. What role will central bank, speculative and institutional activity play in driving prices?
4. How will the demand from emerging markets and technology and renewable energy sectors evolve?

My personal “Flag planting” for 2025 is that although we may be likely to see a ceiling of 2800 in the early couple of months of 2025, with uncertainty and perhaps a “foot off the pedal” approach” relating to Federal Reserve action and a new US administration, it would take something significant in the data to push Gold to, and through $2550. 

The evidence points to a potentially strong 2025 subsequently and a serious test of $3000 looks on the cards as a strong potential.

 

Summary: Navigating Gold’s Path and your approach in 2025

Gold remains a multifaceted asset, influenced by a complex interplay of economic, geopolitical, and technical factors. 

As we navigate 2025, investors must stay attuned to shifts in monetary policy, global stability, and demand trends to make informed decisions. Whether as a hedge against uncertainty or a strategic investment, gold’s enduring appeal ensures its relevance in the year ahead.

Your responsibility as a trader or investor is twofold:

1. Keep abreast of changes in those influential factors outlined above, and offer daily and regular updates on all major assets classes, including gold, to avail yourself with the knowledge you need to make the decisions that are right for you and your objectives, 
2. Consider alternative ways to trade gold, e,g, gold futures and share CFDs offer the opportunity to trade long or short so you can take advantage of any move, 

Of course, the former also has the distinct advantage of being “open” throughout the 24-hour period meaning you can respond to changes in a timely way rather than waiting until the next “market open” for stocks.

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