This article was published on December 20, 2024.

Geopolitics and worsening government debt are likely drive the price of gold up through $3000 per Troy ounce for the first time ever in 2025, extending this year’s run of new record prices. Gold could face some near term headwinds however.

Given all the market shenanigans in the wake of this week’s Fed announcement, gold was never going to come out unscathed in the short term. The Fed’s declaration of a hawkish shift in rate cut expectations next year led to a significant ‘risk off’ move from speculators.

Equities slumped, while the US dollar soared, along with bond yields. But given the surge in market volatility, and all those superficial factors which are seen as being so damaging for gold, the metal held up extremely well. It dropped 2% in the two hours following the announcement, breaking below $2,600 to hit its lowest levels in a month. But it managed to find support around $2,580.

Outlook for gold prices in 2025

But outside the mid-December moves in precious metals, what is the gold outlook like for 2025?

“Investors are optimistic about gold and silver for 2025 because they are so pessimistic on geopolitics and government debt,” said Adrian Ash, Director of Research at BullionVault.

With Donald Trump’s return to the White House threatening to up-end global trade as well as the West’s political and military alliances, investors are taking the potential of precious metals very seriously as a hedge against risk.

The price of gold has risen by 27.9% this year in terms of the US dollar, its 18th annual gain of the 21st century to date and its strongest rise since 2007.

Respondents to BullionVault’s recent survey – run twice every year since the end of 2014 – last December forecast that gold would reach $2342 this Christmas. Although 11% shy of the current price of $2603, that was much closer than consensus forecasts from bullion-market professionals.

Where will the gold price be by the end of next year?

BullionVault’s latest survey, polling nearly 1,450 responses, now forecasts a gold price of $3070 per Troy ounce at the end of 2025, an increase of 16.2% from today’s level. The survey finds even greater confidence in silver, forecasting an end-2025 price of $36.90 with a projected increase of 21.7% from today.

The more industrially useful precious metal this year recorded its 15th annual rise since Millennium Eve, gaining 27.5% and hitting a run of 13-year highs.

“2024 has proved a remarkable year for gold,” said Ash, “topping a stellar quarter-century during which the precious metal has beaten the return from all other assets, even the US stock market. While surging demand from households in China and India has supported this move, the switch into gold by private investors and more recently central banks has driven the precious metal to new all-time highs in terms of all currencies.”

Asked what they believe will be the number one driver of precious metals prices in the coming 12 months, almost a third of BullionVault users (31.4%) named geopolitics as the biggest factor, overtaking monetary policy in BullionVault’s New Year survey for the first time since 2022.

Concerns over the size of government budget deficits and debt come next, polling one-in-five responses (20.8%) and moving up to second place for the first New Year survey in four. That factor also tops the longer-term challenges facing the global economy and investors, named by more than a quarter of investors (28.5%) as the single biggest threat to 2050, followed by a loss of confidence in government (18.8%) and the growing risk of outright war between major powers (17.5%).

“Looking ahead to 2025, the key factors for gold will be US-China trade relations and the resilience of the US economy,” said Dilin Wu, a research strategist with Pepperstone. “If China’s economy weakens further, the yuan may be devalued, which may limit gold demand from the country. However, if US growth slows due to rising inflation from tariffs or tough immigration policies, traders may turn to gold as a safe-haven, driving prices higher. In either case, gold’s role as a hedge against uncertainty and potential economic setbacks could benefit its price in the first quarter of 2025.”

The turnaround in gold’s fortunes so far this century shows how investment trends come and go. Twenty-five years ago, gold was in the wilderness, unwanted by central banks, unloved by investors, and struggling to find demand from its big consumer markets following the Asian 1990s financial crisis. While the positive shock to gold prices from those factors turning around now lies in the past, the key trends driving gold prices upwards since the millennium look set to continue, at least for the near-term.

“On a global scale, monetary policy decisions in the UK and Japan could [also] affect the market,” said Bas Kooijman, the CEO of fund manager DHF Capital. “Additionally, gold could gain further upside momentum as strong central bank demand continues to support its performance.”

Source: The Armchair Trader