Why Gold Prices Are Forecast to Keep Rising Into 2025

While 2025 is the Year of the Snake in the Chinese zodiac, for gold, it promises to be another bull year. The price of gold reached a historic high of USD 2,630 per ounce on September 23rd, marking a remarkable 27% gain since the start of 2024. This surge puts the precious metal on track for its best annual performance in over 14 years. With global dynamics shifting, gold's price rally is projected to extend into the coming year, driven by a combination of macroeconomic factors, central bank policies, and geopolitical concerns.

Gold's All-Time High and Continued Momentum

At USD 2,630 per ounce, gold has smashed through previous records, reflecting its enduring appeal as a safe-haven asset. The rise comes as major banks anticipate this trend will continue, fuelled by the renewed demand from exchange-traded funds (ETFs) and broader expectations of a prolonged period of interest rate cuts by central banks.

The Fed's Easing Cycle

The Federal Reserve

The U.S. Federal Reserve's monetary policy is central to gold's bullish outlook. With the Fed expected to lower rates by another 50 basis points by the end of the year and an additional 100 basis points in 2025, the environment for gold remains highly supportive. Lower interest rates make gold a more attractive investment compared to other assets like bonds, whose yields diminish as interest rates fall. Historically, gold thrives when borrowing costs drop, and this current easing cycle appears to be just getting started.

Waning Consumer Confidence

Another critical factor contributing to gold's rise is waning consumer confidence. The Conference Board’s Consumer Confidence Index fell sharply to 98.7 in September from 105.6 in August, falling well below the estimations for this month, which rested at 103.9. This drop reflects growing pessimism about the economic outlook despite the measures the Fed is taking, increasing the appeal of gold as a stable store of value in uncertain times. Investors often flock to gold when economic conditions weaken, protecting their wealth against potential downturns.

China’s Economic Stimulus and Global Demand

 

China, the world’s second-largest economy, is also playing a key role in supporting gold's rise. On Tuesday, the People’s Bank of China announced its most aggressive stimulus measures since the Covid pandemic, including significant cuts to borrowing costs. This is designed to lift China’s flagging economy, but it also has a side effect: boosting demand for assets like gold, which are a safer bet for Chinese consumers than traditional investment avenues such as real estate. As China's economy rebounds and domestic demand for gold increases, this trend could push global prices even higher.

Geopolitical Tensions Escalating

As geopolitical tension rises, this only fuels gold prices to rise further

Gold’s role as a geopolitical hedge is coming into sharp focus as conflicts in the Middle East and the Ukraine-Russia war show no signs of resolution. In recent days, Israel’s military has carried out new strikes on southern Lebanon amid escalating tensions with Hezbollah, while Ukraine continues its counter-offensive against Russian forces. Investors view gold as a reliable hedge against geopolitical instability, and with these conflicts intensifying, the demand for gold is likely to remain strong.

Central Banks Keep Buying

The Chinese Central Bank

One of the lesser-discussed but critical drivers of gold’s continued rise is the ongoing purchase of the precious metal by central banks. Many countries, especially those in emerging markets, are increasing their gold reserves to reduce reliance on foreign currencies, particularly the U.S. dollar. This trend is unlikely to slow in 2025, further underpinning gold’s price rally.

Economic Data Signals Slowing Growth

 

Adding to gold's appeal are the latest S&P Global PMI figures released on September 23rd, which indicated slowing growth in the U.S. private sector. The data also revealed that the manufacturing sector has now faced three consecutive months of contraction, while the service sector's growth has also decelerated. Slowing economic growth often increases the demand for gold, as investors seek to protect their portfolios from market volatility.

Many investors want to avoid the market chaos caused by events such as the Yen Carry Trade, so have moved their focus towards gold rather than stocks

With macroeconomic pressures, geopolitical instability, and central bank policies aligning to create a favourable environment for gold, 2025 is shaping up to be another stellar year for the precious metal. As interest rates fall, consumer confidence wanes, and global tensions rise, the case for gold as a safe-haven investment becomes increasingly compelling. Investors looking to diversify and hedge against uncertainty will continue to turn to gold, driving its price higher in the year ahead.