How will gold prices unfold in 2025? Understand these three main drivers and you'll get it.

Since the end of last year, gold prices have experienced the most explosive rally in 30 years. After breaking through $4,300, they have been oscillating around $4,400. The market remains hot, but doubts have also arisen—Will this gold trend continue? Is it too late to enter now?

Instead of guessing whether prices will go up or down, it’s better to first understand the core logic driving gold prices. Clarifying these points makes it much easier to respond to the fluctuations in gold trends.

The Three Main Drivers Fueling the Surge in Gold Prices

First Driver: Safe-Haven Flows Triggered by Tariff Policies

Since Trump took office, a series of tariff measures have been introduced, directly igniting market risk aversion sentiment. Historical experience shows that during periods of policy uncertainty, gold prices typically see a short-term increase of 5-10%. The US-China trade war in 2018 serves as a lesson—back then, gold became a “safe harbor” for capital.

The higher the uncertainty, the more funds flow into gold. This is the market’s habitual response.

Second Driver: Expectations of Federal Reserve Rate Cuts

The logic is straightforward: rate cuts → dollar weakens → gold becomes more attractive.

The deeper mechanism is this: Real interest rate = Nominal interest rate - Inflation rate. Gold prices have an inverse relationship with real interest rates; the lower the interest rate, the lower the opportunity cost of holding gold, making it more appealing for investors.

Why did gold fall after the September FOMC meeting? Because the 25 basis point rate cut was already priced in by the market, and Powell did not hint at further rate cuts, leading to market caution about the pace of future cuts.

According to CME interest rate tools, the probability of a 25 basis point rate cut at the December Fed meeting is 84.7%. You can use FedWatch data changes to gauge the direction of gold trends.

Third Driver: Central Banks Worldwide Are Hoarding Gold

Data from the World Gold Council shows that in Q3 2024, 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, slightly below the same period last year but still significantly higher than other times.

Interestingly, in a June survey by the council, 76% of responding central banks believed their gold holdings would “moderately or significantly increase” over the next five years, while most expect the dollar reserve ratio to decline. This is a strong signal—global policymakers are actively expressing confidence in gold through their actions.

Other Factors Contributing to the Rise

Global High Debt Environment

By 2025, global debt will reach $307 trillion. High debt levels limit the policy flexibility of central banks, leading to accommodative monetary policies, which tend to lower real interest rates and support gold prices.

Declining Confidence in the US Dollar

When the dollar is under pressure, gold priced in USD benefits. Reduced trust in the dollar naturally drives more funds into safe-haven assets like gold.

Geopolitical Risks

The ongoing Russia-Ukraine conflict and tense Middle East situations increase demand for safe assets, causing short-term volatility.

Sentiment-Driven Factors

Media coverage and social media hype can attract large short-term capital inflows, creating upward momentum. However, these factors can cause sharp fluctuations in the short term and do not necessarily indicate a long-term trend.

How Do Institutions View Gold Trends in 2025?

Despite recent corrections, professional institutions remain optimistic about long-term gold prospects.

J.P. Morgan Commodity Team considers the recent pullback a “healthy correction” and has raised its Q4 2026 target price to $5,055 per ounce.

Goldman Sachs maintains a target price of $4,900 per ounce by the end of 2026.

Bank of America is more aggressive, raising its 2026 target to $5,000, with strategists even suggesting gold could surge past $6,000 next year.

Chain jewelry brands like Chow Tai Fook, Luk Fook, Chao Hong Ji, and Chow Sang Sang still quote pure gold prices above 1100 RMB/gram, reflecting market confidence in gold’s stability.

What Should Retail Investors Do Now?

If you’re a short-term trader

Volatility is an opportunity to showcase your skills. High liquidity and clearer directional signals make it easier to judge when to buy or sell, especially during sharp rises or falls. But this requires practical experience.

Avoid blindly chasing highs as a beginner. Start with small capital to test the waters—don’t add to positions recklessly. Use economic calendars to track US data releases, which can help optimize your trading timing, especially since market volatility tends to amplify around US data releases.

If you want to buy physical gold

Be prepared for significant fluctuations. The annual average volatility of gold prices is 19.4%, higher than the S&P 500’s 14.7%. The long-term trend is upward, but there will be ups and downs. Transaction costs also matter, generally ranging from 5% to 20%.

If you want to allocate a gold investment portfolio

Diversification is smarter—don’t put all your assets into gold. Consider holding long-term positions while seizing short-term opportunities during price swings, especially around US data releases.

Key Reminders

Gold has a long cycle; using it as a hedge requires a time horizon of at least 10 years to realize its value. But within this decade, prices could double or be cut in half—mental preparedness is crucial.

Understanding these logical drivers of gold prices means that whether you’re a medium-long-term or short-term investor, there are still opportunities in this wave of market movement. But remember one thing: don’t follow the herd blindly. During volatile times, chasing highs and selling lows can be very costly. Novice investors should be especially cautious—start with small amounts, develop market intuition, and that’s the best approach.