Forecast: Gold will likely hit $3,000 in 2025, but analysts are not expecting another 30% rally
NEW YORK (December 22) Gold's historic rally in 2024 is far from over as the new year approaches; however, many analysts are warning investors to temper their bullish enthusiasm, at least during the first half of the year.
Many analysts expect gold prices to hit $3,000 an ounce next year, but the rally is not expected to materialize until the second half of 2025. At the same time, with prices consolidating around $2,650 an ounce, next year's target would represent roughly a 13% gain compared to this year's nearly 30% rally.
In a recent interview with Kitco News, Chantele Schieven, Head of Research at Capitalight Research, said the gold market is in a wait-and-see mode as investors try to gauge the health of the economy as it battles stubborn inflation.
At the same time, markets are trying to weigh geopolitical risks and uncertainty as President-elect Donald Trump prepares to take the reins of government.
Although gold has been consolidating since prices peaked in late October, Schieven noted that the market has managed to hold its own despite significant headwinds.
Heading into the new year, gold has managed to hold critical support around $2,600 an ounce after the Federal Reserve, in its final monetary policy meeting of 2024, signaled fewer rate cuts next year. According to its updated economic projections, the central bank is looking for two rate cuts next year; in September, it was expected to cut interest rates four times.
In this environment, Schieven said she sees gold prices trading between $2,500 and $2,700 an ounce in the first half of 2025. However, she predicts a rally in the second half of the year, pushing prices above $3,000 an ounce.
At the start of 2024, Schieven had the most bullish forecasts among all analysts surveyed by the London Bullion Market Association in its 2024 forecast survey.
"I am still as bullish on gold for 2025 as I was in 2024, but right now, the gold market needs a bit of a breather," she said.
Bank of America is also expecting gold prices to consolidate through the first half of 2024, even as it sees prices pushing above $3,000.
"We are stuck in an environment where there is nothing tangible to get investors back into the market," said Michael Widmer, Managing Director and Head of Metals Research, during Bank of America's annual outlook webinar.
Commodity analysts at America's second-largest bank said in their outlook report that gold faces significant headwinds, in part because Western investors will have to contend with potentially higher bond yields and a stronger U.S. dollar.
"The Trump administration will, in all likelihood, push through a policy mix that, through stronger growth, higher inflation, higher rates, and a stronger USD, might well limit the appetite of investors to increase gold purchases in the near term," the analysts said.
While Western investment demand could struggle as the Fed's slowing easing cycle supports the U.S. dollar and bond yields, many investors are paying more attention to the global landscape.
John LaForge, Head of Real Asset Strategy at Wells Fargo, said in his bank's annual outlook webinar that he will not be paying much attention to the Federal Reserve in 2025. Economists at the bank expect the U.S. central bank will cut rates only once next year.
LaForge said he expects gold prices to be driven by emerging market central bank demand as nations continue to diversify away from the U.S. dollar.
"Most of the emerging markets that have gold on their balance sheets still hold a very small percentage—one, two percent at most," he said. "I think this trend still has legs."
Tom Bruce, Macro Investment Strategist at Tanglewood Total Wealth Management, said he is also paying more attention to central bank demand than to opportunity costs dictated by real yields.
Bruce noted that the correlation between gold and real yields broke down in 2022 as markets reacted to Western nations, led by the U.S. government, imposing harsh sanctions on Russia for invading Ukraine. The move was seen by many as weaponizing the U.S. dollar and helped spread the growing de-dollarization trend.
"Central bank demand has become the dominating factor for gold," he said.
At the same time, analysts are also paying attention to emerging market consumer demand.
At the start of 2024, gold prices were driven by record purchases from central banks and unprecedented demand from Asian, primarily Chinese, consumers and investors.
Although central banks have slowed their gold buying in recent months, they continue to be net buyers, and that trend is expected to remain firmly in place through 2025. At the same time, weak global economic growth, the threat of higher inflation, and geopolitical instability will further support consumer demand, specifically in emerging markets, according to some analysts.
At the start of the month, South Korean President Yoon Suk Yeol introduced a new element of geopolitical uncertainty by declaring martial law, which was later lifted through a vote in Parliament.
According to media reports, during those days of uncertainty, the Korea Exchange sold about 501 kilograms of gold from Dec. 4 to Dec. 13.
"Uncertainty is not going away, and I expect Chinese investors will continue to buy gold to protect their wealth," said George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors. "But it's not just the Chinese; we are going to see strong consumer demand throughout emerging markets."
In its 2025 outlook forecast, State Street sees a 50% chance of gold prices trading between $2,600 and $2,900 an ounce, a 30% chance of prices trading in a range between $2,900 and $3,100 an ounce, and only a 20% chance of gold prices seeing a sustained drop below $2,600 an ounce.
"I am not at all concerned with the Federal Reserve's monetary policy," Milling-Stanley said. "I'm not expecting to see any sustained weakness in gold in 2025. There is a sound economic case for gold next year."
Meanwhile, gold demand in India continues to grow. According to the World Gold Council, quoting government trade data, gold imports hit a record high in November.
According to the data, about $14.8 billion worth of gold was imported last month—"more than double the previous month's total and over four times higher than the same period last year," said Kavita Chacko, Head of Research India at the WGC.
Looking ahead, Chacko said jewelry demand in India may face short-term pressure due to the upcoming inauspicious period for gold purchases, but investment demand is expected to remain supportive.
In their 2025 outlook reports, analysts at the WGC said their modeling suggests the gold market will be much more nuanced as investors gauge the health of the global economy.
"The market consensus of key macro variables such as GDP, yields, and inflation—if taken at face value—suggests a positive but much more modest growth for gold in 2025," the analysts said in the report. "Upside could come from stronger-than-expected central bank demand or from a rapid deterioration of financial conditions leading to flight-to-quality flows. Conversely, a reversal in monetary policy, leading to higher interest rates, will likely bring challenges."
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