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The price of gold is set to rise further in 2025, say Wall Street analysts, although the pace of gains may slow after last year's rally of 27 percent.
Gold It is expected to rise to around $2,795 a troy ounce by the end of the year, according to a general estimate of banks and refiners surveyed by the Financial Times. That's about 7 percent above current levels.
Yellow metal is expected to continue to benefit from global buying central bankswhich have diverged away from the dollar since the US imposed sanctions on Russia following its 2022 all-out invasion of Ukraine.
Interest rate cuts by the US Federal Reserve, concerns about growing US government debt levels under president-elect Donald Trump and conflicts in the Middle East and Ukraine are also expected to raise prices. Such factors have been responsible for bullion's biggest annual gain since 2010 last year.
“We think central bank interest rates will be a strong basis for buying next year,” said Henrik Marx, head of global trading at Heraeus Precious Metals, who predicted gold could reach as high as $2,950 per troy this year.
He added that Trump's second term as president is likely to support gold prices. “Anything he announces will increase debt, leading to a weaker dollar and higher inflation. That's usually a good mix of gold.”
The World Gold Council said this year's increase “will be positive but more modest”.
The most bullish call among those surveyed comes from Goldman Sachs, which expects prices to reach $3,000 by the end of 2025. The bank mentions the demand of the central bank and the reduction of the expected rate by the Fed.
The most bearish forecasts came from Barclays and Macquarie, both of which expect gold to sink to around $2,500 per troy ounce by the end of the year – about 4 per cent down from current levels.
“Our baseline scenario to 2025 is for gold to initially face continued pressure from the strength of the US dollar, but supported by improved physical purchases and demand from the official sector,” Macquarie analysts wrote in their year-end outlook.
Global central banks bought 694 tonnes of gold in the first nine months of 2024. The People's Bank of China announced in November that it was resuming gold purchases after a six-month hiatus.
Lower interest rates in the US contributed to gold's rally in the second half of last year, and the pace of further cuts could be critical to the yellow metal's outlook. Gold prices retreated slightly after the Fed cut rates in December but signaled that borrowing costs will fall less than expected in 2025.
Because gold is a non-yielding asset, it tends to benefit from low interest rates, since the cost of holding it is low.
Trump's election in November provided the best conditions for gold, due to the possibility of increased US fiscal spending and increased political uncertainty, said Michael Haigh, head of commodity research at Société Générale.
“The momentum is taking a backseat, combined with geopolitical tensions, which will add more fuel to the fire,” said Haigh, who expected gold prices to rise to $2,900 per troy by the end of 2025.