Is there still a chance for gold prices in 2025? Understanding this rally from market logic

Recently, gold prices have become the focus of market attention. Since the second half of last year, XAU/USD has continued to hit new highs, approaching $4,400 per ounce by the end of October, with gains nearing the highest levels in 30 years. But will this rally continue? Is it too late to enter now? To answer these questions, we first need to understand the underlying logic driving gold price movements.

The Three Main Drivers Behind the Continuous Rise in Gold Prices

Safe-Haven Demand Driven by Policy Uncertainty

Since the beginning of 2025, a series of tariff policies have been introduced, significantly increasing market uncertainty. Historical experience shows that during periods of policy uncertainty, gold typically experiences a short-term increase of 5-10%. This time, the impact is broader, with more intense risk aversion, boosting demand for gold allocation.

Recurrent Expectations of Federal Reserve Rate Cuts

Central bank policies have a decisive influence on gold prices. A rate cut by the Federal Reserve tends to weaken the US dollar, lowering the opportunity cost of holding gold and increasing its attractiveness. According to CME interest rate tools, the probability of a 25 basis point rate cut in December is 84.7%. The key is that real interest rates and gold prices have an inverse relationship—when real rates decline, gold tends to rise. This also explains why gold price fluctuations closely track Federal Reserve decisions.

Continued Central Bank Gold Purchases Globally

According to the World Gold Council, in Q3 2025, global central banks net purchased 220 tons of gold, a 28% increase from the previous quarter. In the first nine months, central banks accumulated about 634 tons of gold. More importantly, 76% of surveyed central banks expect to increase their gold reserves over the next five years while reducing their US dollar reserves. This reflects growing confidence among central banks in gold as a reserve asset.

Other Factors Supporting Gold Prices

In addition to the three main drivers above, several background factors are worth noting. The high level of global debt at $307 trillion limits policy options for countries, making loose monetary policy a likely trend, which can depress real interest rates. Ongoing geopolitical tensions also strengthen demand for safe-haven assets. Furthermore, continuous media and social media attention have attracted short-term capital inflows, amplifying the rally to some extent.

It is important to note that these short-term factors may trigger significant volatility, but they do not necessarily indicate a long-term trend. Especially for Taiwanese investors who need to consider USD/TWD exchange rate fluctuations, nominal returns and real returns may diverge.

How Do Institutions View the Gold Price Trend in 2025?

Despite recent corrections, many major global investment banks remain optimistic about gold’s outlook. JPMorgan considers this adjustment a “healthy correction” and has raised its Q4 2026 target price to $5,055 per ounce. Goldman Sachs reaffirmed its end-2026 gold price target at $4,900 per ounce. Bank of America is more aggressive, suggesting gold could challenge the $6,000 mark next year. The reference prices for physical gold jewelry from well-known jewelry brands also remain above 1,100 yuan/gram, with no significant decline.

Experts generally believe that gold, as a globally trusted reserve asset, still has strong medium- to long-term support. However, in practice, investors should remain cautious of volatility around US economic data releases and Federal Reserve meetings.

How Should Retail Investors Respond to the Current Market?

Short-Term Trading Opportunities

If you have some trading experience, the current volatility offers many short-term opportunities. Liquidity is ample, and the direction of price movement is relatively easier to judge, especially during sharp rises or falls. The key is to grasp the rhythm and capitalize on fluctuations around US market data releases.

Caution for Beginners

Beginners must remember: start with small amounts to test the waters, and avoid blindly increasing positions. Gold’s annual volatility averages 19.4%, much higher than the S&P 500’s 14.7%. This means the risk of fluctuation should not be underestimated. If your mindset breaks down, it’s easy to buy high and sell low repeatedly, ultimately losing your principal.

Long-Term Allocation Considerations

If you plan to include gold as part of your investment portfolio, ask yourself whether you can withstand significant medium-term volatility. Gold’s cycle is long; only holding for over 10 years can fully realize its hedging function. However, during this period, prices could double or be cut in half. Physical gold also involves relatively high transaction costs (5%-20%), so over-concentration is not recommended.

Balanced Strategy

The most prudent approach is to hold long-term while taking advantage of price fluctuations for short-term adjustments. Especially around US market data releases, volatility tends to increase significantly, providing arbitrage opportunities for savvy investors. However, this requires some trading experience and risk management skills.

A Few Important Reminders: Don’t put all your assets into gold; diversification is always smarter; closely monitor Federal Reserve actions and economic data, as they are key references for gold price trends; rationally assess your risk tolerance and avoid being blinded by short-term gains.

Since 2023, gold prices have shown new characteristics. The rally in 2025 may still have room to grow, but only if you understand clearly what you are doing.