Gold, which has been a strong performer in 2024, is expected to face two different scenarios next year as uncertainties weigh on investor sentiment, according to the WGC’s 2025 Outlook report published on Thursday. However, the main scenario is that prices will follow a relatively neutral movement if current market conditions continue.
Gold is set to close the year with a gain of over 30%, above $2,700 per ounce. This marks the best rally in decades. However, investor sentiment around the precious metal has shifted from last year. Heading into 2024, investors were expecting gold to perform strongly as markets priced in aggressive rate cuts from the Fed. Despite the long-standing hawkish stance, gold has reached consecutive record highs throughout the year as central bank demand remains strong. According to their modeling, WGC analysts predict that the gold market will become more complex. As investors continue to gauge the health of the global economy, they are projecting positive but more modest growth for gold in 2025.
According to analysts, the expected rise in the gold market could be due to strong demand from central banks or a rapid deterioration in financial conditions, which could lead to quality flight. However, a policy shift that would lead to higher interest rates could cause difficulties in the gold market. The WGC emphasizes that a significant risk to the future of gold is Donald Trump’s uncertain economic policies, such as tariffs that threaten to drag the global economy into trade wars in order to support domestic production. Many economists predict that such tariffs would further increase already high inflation, which could affect the Fed’s current monetary policy stance. Markets have begun to reduce their expectations for rate cuts in 2025. Bank of America expects only two rate cuts next year, while Wells Fargo predicts only one.
In this context, analysts say that the actions of the Fed and the direction of the US dollar will continue to be important drivers for gold. However, as seen in recent years, these are not the only factors that determine gold's performance. It is believed that a more robust framework covering all sectors of gold demand and supply will have an impact on gold prices.
Finally, it is stated that the biggest source of support for gold continues to be central bank demand. The WGC predicts that central banks will continue to buy gold, but that purchases will slow down compared to recent years. However, analysts believe that the current trend will continue and that central bank purchases above the 500 ton level will have a clear positive impact on gold prices. Central bank demand is expected to exceed this level in 2025.