“Well, Director Diehl, you were spot on with your gold price forecast last year. What does your crystal ball say about 2025?”
First, I don’t have a crystal ball. I make my calls based on assessments of the forces that determine prices in the 21st-century market. Other analysts may say something similar, but many still assess gold’s prospects through a 20th-century lens, subscribe to outdated conventional wisdom, or infuse their opinions with political biases. I avoid these traps.
Gold rose by over $600/oz. in 2024, the largest annual gain in modern times. I expect the yellow metal to end 2025 above $3,000/oz., which would make gold’s gain this year the second largest annual gain in modern history, possibly even surpassing last year’s record.
Why am I so optimistic about gold? Because the “perfect storm” of forces that drove prices last year will drive prices again this year. In fact, those forces may intensify in the coming year, which would make my price forecast on the conservative side.
What are the forces that make up this “perfect storm”?
Central bank gold-buying
Central banks’ buying of gold received a lot of analyst attention last year, but it was less of a factor than many understood. Until May, most of the buying was done by a single bank—the People’s Bank of China (the PBOC)—which then halted its gold acquisitions for six months. The PBOC resumed buying in November, and I expect it to continue buying in 2025 as China marshals its resources for a confrontation with the West.
I expect central bank buying, in China and elsewhere, to be stronger in 2025 than it was in 2024.
Asian retail buying
Chinese retail demand is often unappreciated for its role in setting global gold prices. That role grew as the Chinese economy tanked in 2024.
China strictly limits its citizens’ access to asset classes that protect investors from wealth erosion. Chinese real estate, stocks, and bonds have taken severe beatings for several years, leaving gold as the primary means for Chinese citizens to protect their wealth. As a result, China’s consumers have bought gold hand over fist.
The Chinese economy will not turn around anytime soon. Retail demand was muted last year during the PBOC’s six-month gold-buying hiatus, but now that the bank is buying again, I expect Chinese retail demand to come roaring back.
A word about India is necessary here: If public demand in China is often overlooked by analysts, Indian demand is off the radar screen. China and India regularly trade places as the world’s number one and number two retail gold markets. Together, they represent two thirds of the global retail market. I expect Indian demand in 2025 to surpass 2024 volumes—another force driving gold upward.
Geopolitics and war
The year 2024 was marred by rising military conflict in Europe and the Middle East and escalating tensions in the South China Sea, around Taiwan, in the Caucasus region, in the Arctic, and in Africa. In other words, around the globe.
War and rumors of war have been drivers of gold prices from time immemorial. As China, Russia, Iran, and North Korea (now collectively known as the CRINK alliance) draw closer into an alliance against the West, I expect these tensions and outright military conflicts to intensify in 2025.
We are not in a world war, but we are headed in that direction, and the West is far less prepared for a multi-front conflict than the CRINK alliance is.
Economic uncertainty
I believe Americans are entering 2025 with a false sense of economic security. The economy was strong right through the fourth quarter of 2024, but that seems unlikely to last. Consumers and businesses blew it out late last year in anticipation of higher prices in 2025 because of the tariffs President Trump has proposed. We should view this binge as consumers and businesses making purchases they would otherwise have made in 2025. As a result, demand will weaken in the first half of the year, and economic growth may slow.
Another factor threatening the economy in 2025: high interest rates, discussed later in this article.
Political instability
Autocrats’ favorite distraction from economic problems at home is saber-rattling and waging war abroad. Just watch Russia vs. Ukraine and NATO; Iran vs. Israel and the West; China vs. Taiwan, the Philippines, and the United States; or North Korea vs. South Korea, Japan, and the United States.
With Russia, China, and Iran having deepening economic problems, we should expect the temptation to grow for their leaders to intensify regional military conflicts.
President Trump’s muscular approach to foreign relations—his trade policies and suggestions that he might turn to arms to achieve key policy goals—is likely to add to international tensions this year.
Political instability reigns in the West, too. Include in that list Canada, France, Germany, Israel, Poland, Spain, South Korea, and the United States.
I expect geopolitical tensions to rise, further fueling gold prices this year.
Interest rates
Speculation on Federal Reserve monetary policy jerked markets up, down, and sideways in 2024. And last September, when the Fed finally cut the federal funds rate, interest rates paid by consumers and most businesses rose instead of falling.
Rates are likely to remain high this year, perhaps even rise, until the full scope of President Trump’s tariffs and the prospects for his tax and spending cuts are known. Both would have inflationary effects since they would raise prices and increase the federal deficit.
Another force likely to support high interest rates this year is $3 trillion in U.S. debt that will mature and have to be refinanced at higher rates in a market saturated in global corporate and sovereign debt issuances. If global markets cannot withstand this tsunami of debt, the full consequences are unknown. But higher debt financing costs are a certainty, compounding the nation’s debt-carrying costs and undermining equity markets.
Another consequence of high interest rates is the pressure they will put on banks. Higher-for-longer rates could lead to a replay of the 2023 banking crisis when Silicon Valley Bank, Silvergate Bank, and Signature Bank all failed within a matter of days in the largest bank collapse since the 2008 Financial Crisis.
Watch for more news on this front as the market comes to appreciate the risks banks face based on their capital, fire-sale, liquidity stress, and bank-run vulnerabilities.
Finally, there is the risk of black-swan events that we simply cannot anticipate. All these forces will continue to fuel the “perfect storm” driving gold prices to record level after record level.
Last year was an exceptionally good year for gold. In fact, it outperformed the equity markets. I expect 2025 to set the same pace. Protect your wealth and tap into the extraordinary appreciation opportunity gold offers buyers today.
