- Gold's outlook for 2025 remains strong, driven by central bank accumulation, robust ETF demand, and geopolitical uncertainties
- Interest rates are expected to decline, potentially weakening the U.S. dollar and enhancing gold's attractiveness as an alternative asset
- Jewellery demand may face challenges from high prices, but auspicious wedding dates in India could provide a boost
Harare- A Safe Haven Asset on the Rise
After achieving record highs in both production and prices in 2024, gold is poised to continue its upward trajectory into 2025. The outlook for the precious metal remains notably bullish, driven by a combination of factors that solidify its status as a safe haven asset.
Central bank accumulation is anticipated to play a pivotal role in gold's continued strength. With geopolitical tensions escalating, particularly due to the ongoing Russia-Ukraine war and the Israel-Hamas conflict, central banks are expected to sustain their aggressive buying strategies.
According to the World Gold Council, global central banks could exceed 1,000 tonnes in gold purchases for the fourth consecutive year as they seek to diversify their reserves away from fiat currencies. This trend reflects a broader strategy to mitigate risks associated with economic instability and geopolitical uncertainties.
In addition to central bank demand, robust investment from gold exchange-traded funds (ETFs) is likely to contribute to the metal's appeal. The U.S. market is expected to witness substantial inflows into gold ETFs, driven by investor sentiment favoring gold as a hedge against inflation and economic uncertainty.
While China's ETF demand remains strong, it may be slightly subdued compared to 2024 levels due to the weakness of the renminbi and high benchmarks.
The macroeconomic environment is also shaping the outlook for gold.
A gradual decline in interest rates, influenced by the pro-growth agenda of the Trump administration, is anticipated to create temporary inflationary pressures.
As interest rates decrease, the U.S. dollar is expected to weaken, further enhancing gold's attractiveness as an alternative asset. The European Central Bank (ECB) is projected to implement a 1% rate cut, which could re-engage European ETF investors despite the presence of positive real rates.
In the bar and coin segment, demand may be tempered by economic malaise and elevated prices in the West. However, as interest rates decrease, interest in physical gold may revive in the latter half of the year. Meanwhile, demand in key markets like China and India is expected to remain solid, although slightly weaker due to slowing economic growth in both countries.
However, jewellery demand may face challenges from high gold prices, particularly in important markets like India and China. Despite this, auspicious wedding dates in India could provide a slight boost to jewellery purchases, helping to mitigate some of the demand challenges.
On the production side, high margins are expected to incentivize mine production to reach new highs. However, cautious outlooks remain due to potential reductions in mine supply stemming from de-hedging practices.
The supply of recycled gold is projected to increase, surpassing 350 tonnes in the fourth quarter for the fourth time in a decade. This increase is driven by slowing global economic growth and high gold prices, although constraints may arise from limited near-market supplies.
Therefore, gold's outlook for 2025 is underpinned by robust central bank accumulation, strong ETF demand, and a favorable macroeconomic environment.
As geopolitical uncertainties persist and economic conditions evolve, gold is expected to maintain its status as a resilient safe haven asset, drawing continued interest from investors globally.
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