Investor's Guide to Gold in 2025

Key takeaways

• Gold far exceeded expectations in 2024. Extreme caution in 2025 might also be unwarranted
• Investor demand for gold is firm, broad-based and seems to be maturing
• Fundamentals seem uncertain – but isn’t uncertainty also a support?
• Gold’s technical position currently appears neutral, though critical pivots appear in Q1 2025

Gold Overcomes Cautious 2024 Consensus – What’s Next for 2025?

Gold enjoyed a stellar 2024, ending the year at $2610.85/toz, posting a 26.6% US dollar gain and surpassing returns on both US equity (25.0%) and the c. 0%-5% returns of most global bond and cash markets. This outturn stands in stark contrast to an initial Bloomberg-compiled consensus expectation of a 2024 year-end price for gold of just $2000/toz (3) and an implied annual US dollar return of minus 3%. Quite simply, most gold price forecasters spent 2024 playing catch-up.

Expectations for gold price performance in 2025 seem similarly cautious, albeit from a higher base, given the exceptional 2024 outturn. A current Bloomberg-compiled consensus currently projects a median year-end price of $2675/toz with the range of $1900/toz-$3080/toz skewed to the downside. This implies an annual gold US dollar return of just 2.4% in 2025.

While such a cautious outlook might appear justified based on less supportive fundamental data expected in 2025, we would emphasise the huge upside surprise realised in 2024, despite unexpectedly challenging fundamentals and the wide 2025 forecast spread. We would suggest that most gold-pricing models have still to fully adjust to the secular demand growth for alternative investment assets, or to quantitatively incorporate risk factors such as geopolitics. We would argue that both factors provide price support and in such an environment, forecasts may continue to prove lagging, rather than leading indicators.

Gold Investor Demand is on Solid Ground

From the perspective of a muti-asset portfolio investor, gold continues to perform well, not just in respect of generating healthy real (inflation-adjusted) and risk (volatility-adjusted) returns, but also its contribution to improving a portfolio’s overall risk-return performance. Gold has continued to show low correlations to core assets such as equity and fixed income on rolling, multi-year bases. More significantly these correlations tend to fall even further (or even become negative) in periods of market stress such as the initial COVID-19 shock in March 2020, or the awful investment year of 2022. There is little reason to suspect 2025 will prove different.

Indeed, gold’s role as a ‘portfolio diversifier’ has become more urgent as central banks withdraw their direct support for bond markets through measures such as quantitative tightening and more nuanced forward guidance. This trend will continue into 2025, irrespective of how policy rates evolve. Moreover, equity markets are becoming increasingly correlated and concentrated in the US, prompting wealth managers to optimise portfolios through alternative assets, such as gold.

These shifting dynamics have underpinned investment demand for gold from several sources. Central banks have been net buyers since 2009 and the most recent data (to October 2024) suggests that net purchases in 2024 are on course to reach the near-record levels seen in 2023, despite a 23% increase in average prices. Similarly, gold net speculative long positions as reported in the CTFC’s Commitments of Traders report, indicate wealth managers’ interest in gold remains near the elevated levels seen during the COVID-19 pandemic. (6)

Even in respect of physical gold ETFs/ETCs – which tend to have a high exposure to volatile retail investors – assets have almost returned to levels seen at the start of the year, (7) with December 2024 seeing strong inflows following the post-US presidential Election selloff and the Fed’s ‘hawkish cut’. (8) We expect these positive developments to continue and increasingly be supported by innovative digital gold offerings such as Kinesis gold (KAU), which offers a fully backed gold currency, high levels of security and liquidity and even a yield return. Learn more here: https://kinesis.money/gold/.

Is Uncertain Fundamental Support Actually Support?

Despite gold massively exceeding forecasters’ expectations in 2024, it is also easy to argue that the fundamentals underpinning such price increases significantly disappointed last year.  At the start of 2024, markets were discounting between 1.25% and 1.50% in Fed rate cuts. In the event, it delivered just 0.75% and ended the year on a hawkish note. Equally, the market was convinced that 2024 would see a weaker US dollar. Instead, 2024 saw a 6% increase in the US Dollar Index (DXY). Both outcomes should have further constrained the already modest price forecast for 2024.

By contrast, expectations going into 2025 are low for both the US Fed and the US dollar. According to CME FedWatch futures markets are currently pricing in a weighted average of just 0.42% of Fed rate cuts during 2025, (9) while many analysts are now speculating that the US dollar may continue to strengthen.

However, such low expectations may prove a blessing in disguise for gold; low expectations are usually easier to beat. Moreover, because these expectations are at least partly of due to uncertainty over an incoming Trump administration’s impact on inflation (particularly via trade tariffs), the US deficit (through ‘unfunded’ tax cuts) and the potential to further aggravate current geopolitical flashpoints (especially vs. China), support for gold in 2025 might be stronger than it appears. There are plenty of ‘known unknowns’.

Gold Technical Outlook

Gold enters 2025 with little price momentum and both the standard RSI and MACD measures at neutral/weak levels. However, some caution should be exercised in the interpretation given depressed year-end trading volumes. Immediate upside appears to be bounded by a gently declining 20-day Simple moving average, currently at $2638/toz, while proximate support is offered by a minor ascending oblique, currently at $2589/toz.

Looking further out, stronger support is offered by a horizontal formed at the 15 November low around $2562/toz, an ascending major oblique, currently at $2526/toz and a descending major oblique, currently at $2465/toz. To the upside, also lies the declining 50-day Simple Moving Average, currently at $2657/toz and a steeply descending major oblique, currently at $2695/toz.

It should be noted that the aforementioned descending major oblique is currently on course to intersect both the 20 and 50-day Simple Moving Averages during January 2025, the ascending minor oblique support at $2607/toz on 14 February, a strong ascending oblique support at $2566/toz on 10 March and the strong horizontal support at $2562/toz on 12 March. All five intersections offer opportunities for breakout or breakdown, with successful negotiation clearing the way towards major horizontal resistance at both $2719/toz and $2785/toz.

Citations

1.  https://www.lbma.org.uk/prices-and-data/precious-metal-prices#/table , between last London Bullion Market (LBMA) fixes of 2023 and 2024.

2.  https://www.spglobal.com/spdji/en/indices/equity/sp-500-value/?currency=USD&returntype=T-#overview

3.  Bloomberg-complied consensus as of 31 December 2023. Median $2000/toz, range $1850/toz-$2200/toz.

4.  https://www.gold.org/goldhub/data/gold-correlation

5.  https://www.gold.org/goldhub/data/gold-reserves-by-country

6.  https://www.cftc.gov/dea/futures/other_lf.htm

7.  https://bold.report/gold/holdings

8.  https://bold.report/gold/fund-flows

9.  https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html