Gold Prices Set to Climb at Modest Pace if Market Conditions Persist in 2025, WGC Says
2024-12-12
Category: economic

By Joe Hoppe
Gold prices are likely to climb at a more measured pace in 2025 if market conditions hold steady, according to the World Gold Council.
In its 2025 gold outlook, the industry body said that if the economy performs according to market-consensus expectations gold prices should rise at a more modest rate than this year. Gold has potential for upside if central-bank demand proves stronger-than-expected or if a rapid financial deterioration drives safe-haven demand--though a reversal of the interest rate cutting cycle would bring challenges.
For 2024, the precious metal is set for its best annual performance in more than a decade.
Prices have hit 40 record highs over the course of the year, peaking at $2,826.30 an ounce in late October, while total gold demand in the third quarter surpassed $100 billion for the first time. Despite a short, sharp sell-off following Donald Trump's victory in the U.S. presidential election in early November, prices still sit up more than 25% in the year-to-date.
This reflects central-bank purchases and safe-haven demand against market volatility and geopolitical risks. Concerns about mounting European sovereign debt--coupled with continued geopolitical instability in the Middle East, Eastern Europe and elsewhere--have also driven prices up.
"In all, this could prompt investors to look for hedges, such as gold, to counter risk," the WGC said.
The next year could bring further upside. The market currently is pricing in around 100 basis points of U.S. interest-rate cuts for 2025, according to the report, with a similar figure expected for European central banks. This will benefit non-interest bearing bullion, as will expectations for the U.S. dollar to remain flat or slightly weaken as conditions normalize.
A prolonged pause or even a reversal in rate cutting would however put pressure on investment demand for gold. While U.S. President-elect Donald Trump is expected to put forward a pro-business agenda, there are questions around whether his policies will result in inflationary pressures and supply-chain disruptions--which could lower the size and scope of monetary policy easing.
"As we look forward, all eyes are focused on what Trump's second term may mean for the global economy," the report said.
Elsewhere, Asian demand remains crucial. China and India are the largest markets for gold in the world, and investor appetites helped propel gold to record highs over 2024. The threat of tariffs from Trump looms over Chinese investors, however, and consumer demand will likely depend on the health of economic growth. India is in a better position to drive up gold prices, as its economic growth remains strong and U.S. tariffs are less likely to seriously affect consumers.
Central-bank buying is also likely to remain a core driver for gold prices. While demand in 2024 is likely to end below previous records it is still strong, and demand in excess of 500 metric tons in 2025--the approximate long-term trend--will have a net positive effect on prices.
"Gold's final price performance will depend on the interaction of gold's four key drivers: economic expansion; risk; opportunity cost; and momentum," the report said.
Write to Joe Hoppe at joseph.hoppe@wsj.com