2025 to bring more growth for gold: World Gold Council

Gold is gearing up to end the year with its “best annual performance in a decade”, says the World Gold Council, but its 2025 outlook for the commodity is dependent on several market and economic factors.

The price of gold in US dollars has risen by more than 28 per cent year-to-date and is trading 22 per cent higher on average this year than the previous one. Similar to Bitcoin’s recent surge, total gold demand also exceeded US$100 billion for the first time in the third quarter of this year.

However, the World Gold Council said heading into 2025, all eyes are on the outcome of Donald Trump’s second term as President of the United States.

“As we look into 2025, market consensus suggests that the Fed will deliver 100 bps in cuts by year end, with inflation softening but still above target,” the association’s 2025 outlook report said.

“European central banks will also likely cut rates by a similar amount. The US dollar is expected to remain flat or slightly weaken as conditions normalise, while global growth remains positive but continues to grow below trend.

“In this context, the actions of the Fed and the direction of the US dollar will continue to be important drivers for gold. But just as the past few years have shown, these two are not the only factors that determine gold’s performance.

“We instead rely on a more robust framework that allows us to capture the contribution of all sectors of gold demand and supply. Specifically, we look at the role of:

• Economic expansion – and its direct effect on consumer demand.
• Risk and uncertainty – as a trigger for flows from investors looking for effective hedges.
• Opportunity cost – making gold more (or less) attractive relative to bond yields.
• Momentum – which can boost trends or, equally, mean-revert them.”

The council also indicated gold’s reliance on continuing demand from its two largest global markets, China and India, as well as central banks around the world who tended to top up on their gold reserves during the year.

“This year, Asian investors added to gold’s performance, particularly during the first half, and Indian demand benefitted from the reduction in import duty in the second half.

“However, the risk of trade wars looms large. Chinese consumer demand will likely depend on the health of economic growth – whether through normal means or government stimuli. And while the same factors that influenced investment demand in 2024 are still present, gold may face competition from stocks and real estate.

“Central banks have been net buyers for almost 15 years. The importance of gold in foreign reserves is well recognised: the role it plays as a long-term store of value, as a diversifier, its performance in times of crises, and the fact that it does not carry credit risk. In an environment of ever-increasing sovereign debt and geopolitical uncertainty, gold’s role is well cemented.

“While central bank demand will likely end the year below previous records, it has remained strong, positively contributing to gold’s performance to the tune of 7%–10%. Equally, 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. 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.

“Gold’s final price performance will depend on the interaction of gold’s four key drivers: economic expansion; risk; opportunity cost; and momentum.”