Gold Price Annual Forecast: Is another record-setting year in the books in 2025?

• Gold shined in 2024 as the go-to safe-haven asset, gaining around 25% and reaching a record high.
• Geopolitical developments and Donald Trump’s policies are expected to influence Gold price in 2025.
• Gold’s technical outlook points to a loss of bullish momentum heading into the new year.

Gold benefited from escalating geopolitical tensions and the global shift toward a looser monetary policy environment throughout 2024, setting a new all-time high at $2,790 and rising around 25% for the year. However, the uncertainty surrounding the impact of US President-elect Donald Trump’s policies on the global economy and the unpredictability of the geopolitical environment paint a cloudy picture for the precious metal in 2025.

Gold in 2024: Geopolitics, central-bank purchases fuel rally to new all-time highs

Gold started the year in a relatively quiet manner, spending January and February fluctuating in a narrow channel at around $2,000. Investors refrained from taking large positions, while keeping an eye on geopolitics and assessing the impact of macroeconomic developments on the Federal Reserve’s (Fed) policy outlook.

Toward the end of February, Gold gathered bullish momentum and rose nearly 10% in March, reaching a new all-time high above $2,200 in the process. Selling pressure surrounding the US Dollar (USD), a pullback in US Treasury bond yields, and strong Chinese demand during the Spring Festival fuelled Gold’s rally as the first quarter came to an end. 

Gold extended its uptrend in April and rose above $2,400 before correcting lower in the second half of the month. Nevertheless, XAU/USD closed the month with a gain of over 2%. The unexpected increase in the Personal Consumption Expenditures (PCE) inflation rate in the US caused investors to price in a delay in the Fed policy pivot. As a result, the benchmark 10-year US Treasury bond yield rose more than 10% in April, capping Gold’s upside.

Following a two-month consolidation period in May and June, Gold regathered its strength in July and entered a four-month uptrend. From July to November, Gold gained more than 15% and touched a new record-high near $2,800 on the last trading day of October.

XAU/USD weekly chart

Assessing Gold’s performance in the first half of 2024, “Gold has performed remarkably well in 2024, rising by 12% y-t-d and outpacing most major asset classes. Gold has thus far benefitted from continued central bank buying, Asian investment flows, resilient consumer demand, and a steady drumbeat of geopolitical uncertainty,” said the World Gold Council in its Gold Mid-Year Outlook 2024.

Several factors contributed to Gold’s impressive upsurge in the second half of the year. Major central banks’ decision to start lowering key rates and escalating geopolitical tensions allowed Gold to shine. Additionally, India’s decision to lower Gold import duties to its lowest level in over a decade ramped up the demand for the yellow metal. 

Iran’s involvement in the Israel-Gaza conflict increased fears of a deepening conflict in the Middle East in late summer and spurred safe-haven demand for Gold. Meanwhile, the unwinding of Japanese Yen carry trade positions weighed heavily on the USD in early August, further boosting XAU/USD. 

The Federal Reserve lowered the policy rate for the first time in over four years in September, lowering borrowing costs by 50 basis points (bps), and opted for another 25 bps cut in November. The ongoing disinflation process and growing signs of a slowdown in economic activity caused policymakers to shift their attention to the labor market, opening the door for a policy pivot. In addition to the Fed, the European Central Bank (ECB) lowered key rates by 25 basis points in June, September, October and December. The Bank of England, the Bank of Canada and the Swiss National Bank were among other major central banks that opted for rate cuts, reflecting a global shift toward a looser policy environment.

In early November, Donald Trump’s victory in the US presidential election triggered a rally in the USD despite the Fed’s rate cut. As a result, XAU/USD turned south and lost over 3% in the month, snapping a four-month winning streak. Meanwhile, renewed escalation in the Russia-Ukraine conflict, after US President Joe Biden authorized Ukraine to use powerful long-range American weapons to strike inside Russia, helped Gold limit its losses.

After struggling to find direction in the first half of December, Gold came under bearish pressure after the Fed’s last meeting of the year. Although the US central bank opted for another 25 bps reduction in interest rates in December, the revised Summary of Economic Projections (SEP), also known as the dot plot, showed that policymakers saw the policy rate at 3.9% at the end of 2025, implying a 50 bps cut throughout the year, compared to the 100 bps projected in September’s SEP. US T-bond yields surged higher and caused XAU/USD to stretch lower heading into the Christmas holiday. In the meantime, Fed Chairman Jerome Powell noted that they can be more cautious in reducing rates going forward.

Assessing the impact of Fed’s policy outlook on Gold’s valuation, “the implication is that the resulting higher-than-anticipated cost of carry, and opportunity cost to hold interest rate yielding assets will serve as a very significant headwind for money managers to continue holding outsized long gold exposure,” said Bart Melek, Head of Commodity Strategy at TD Securities.

“This is likely to prompt speculators, who have beefy long positions, to take profits and drive prices lower. The very strong USD is also set to be a material headwind working against gold in the near term,” Melek added.

Gold 2025 fundamental outlook: Looking at the Fed and Trump

Gold faces a two-way risk in 2025, with the Fed’s monetary policy decisions, Trump’s economic and foreign policies, and geopolitical developments becoming the main drivers.

Bearish scenario

A de-escalation of geopolitical tensions in the Middle East and/or a resolution to the Russia-Ukraine crisis could trigger a sharp downward correction in Gold prices, given how much the precious metal benefited from these conflicts throughout 2024. Trump’s “America First” approach suggests that his administration will be focused on domestic policies and possibly not prioritize international affairs. In this regard, Trump could aggressively look to initiate a resolution process in the first months of his presidency.

A hawkish tilt in the Fed’s policy outlook could weigh on Gold prices next year. A lack of progress in disinflation and heightened uncertainty surrounding the inflation outlook, especially if Trump carries on with increased tariffs, could cause policymakers to refrain from gradually lowering interest rates. Unless there is a significant downturn in the labor market, the Fed could afford to adopt a more patient stance without worrying about potentially causing a recession.

Moreover, the performance of the Chinese economy could influence Gold’s demand outlook in 2025. In case Trump ramps up tariffs on Chinese imports, China could retaliate, paving the way for another trade war. As a result, a weaker economy in China, the world’s biggest consumer of Gold, could negatively impact prices.

Bullish scenario

A continuation of policy easing by major global central banks could help Gold push higher in 2025. If there are no inflation shocks, the Fed could continue to steadily reduce the policy rate, causing US T-bond yields to enter a downtrend and boosting XAU/USD. Even if the Fed becomes reluctant to cut rates, Gold could still capture capital outflows from the Euro and the British Pound, and stay resilient against the USD, if the ECB and the Bank of England (BoE) ease the policy aggressively.

An improving Chinese economy could positively impact Gold prices as well. In early December, a meeting of top Communist Party officials, the Politburo, showed that China is planning to adopt an "appropriately loose" monetary policy next year, alongside a more proactive fiscal policy, to spur economic growth. The good news for China is that the annual inflation, as measured by the change in the Consumer Price Index (CPI), softened to 0.2% year-over-year in November. Hence, China could stimulate the economy without paying any attention to inflation.

A further escalation of geopolitical fears could allow Gold to continue to capitalize on safe-haven flows. A widening conflict in the Middle East with a new confrontation between Iran and Israel, or either Russia or Ukraine’s refusal to reach a truce, could cause investors to seek refuge in the precious metal.

Central bank demand

One of the main catalysts for Gold in 2024 was central bank buying. 

“Central banks will remain an important part of the puzzle. Central bank buying is policy driven and thus difficult to forecast, but our surveys and analysis suggest that the current trend will remain in place,” said the World Gold Council in its 2025 outlook report for Gold. “In our view, demand in excess of 500 tonnes (the approximate long-term trend) should still have a net positive effect on performance. And we believe central bank demand in 2025 will surpass that. But a deceleration below that level could bring additional pressures to Gold.”

Annual central bank and official sector demand. Source: World Gold Council

Gold Technical Analysis: Bullish momentum wanes 

Gold’s technical picture points to a loss of bullish momentum. On the weekly chart, the Relative Strength Index (RSI) indicator retreated to its lowest level since February, near 50. Additionally, XAU/USD declined below the 20-week Simple Moving Average (SMA) after spending the majority of the year comfortably above it, and tested the lower limit of the ascending regression channel. 

Gold could meet the first support area at $2,530-$2,500, where the Fibonacci 23.6% retracement of the October 2023 to November 2024 uptrend and the psychological level align. Once XAU/USD drops below this area and starts using it as resistance, the next bearish target could be set at $2,400 (50-week SMA, Fibonacci 38.2% retracement) ahead of $2,300 (Fibonacci 50% retracement).

XAU/USD weekly chart

On the upside, $2,900 (upper limit of the ascending regression channel) could act as the next resistance in case Gold rises to a new record high. The 38.2% trend-based Fibonacci expansion level also reinforces this resistance ahead of $3,000-$3,020 (psychological level, 50% trend-based Fibonacci expansion) and $3,130 (61.8% trend-based Fibonacci expansion).

XAU/USD weekly chart

Summary

It’s not an easy task to assign a direction for Gold in 2025 with high certainty. There are simply too many unknowns. Once Trump’s foreign and economic policies take shape, Gold’s outlook will become less cloudy. A strong Chinese economy, ongoing policy-easing by major central banks and a tense geopolitical environment could trigger another leg higher in Gold prices. If Trump’s policies fuel inflation and weigh on the global economy, Gold could come under pressure. Additional losses could be seen in case the geopolitical atmosphere becomes more favorable for risk trade.