• Strong Performance: Prices surged 26% in 1HY25 marking it as one of the top-performing asset classes
• Future Outlook: Consensus suggests gold may remain rangebound with potential for a 0%-5% increase in H2 2025,
• However, deteriorating economic conditions could push prices up by 10%-15%.
• Investment Demand: Continued strong demand from gold ETFs and central banks is expected

Harare- Gold has continued its record-setting pace, rising 26% in US dollar terms in the first half of 2025, and reaching double-digit returns across currencies. A combination of a weaker US dollar, rangebound rates and a highly uncertain geoeconomic environment has resulted in strong investment demand.

However, one of the questions investors continue to ask is whether gold has reached a peak or has enough fuel to push higher. Using Gold Valuation Framework, gold assessing tool by World Gold Council (WGC), lets analyse what current market expectations imply for gold’s performance in the second half of 2025, as well as the drivers that could push gold higher or lower, respectively.

Gold may move sideways with some possible upside increasing an additional 0%-5% in the second half.  However, the economy rarely performs according to consensus. Should economic and financial conditions deteriorate, exacerbating stag-flationary pressures and geoeconomic tensions, safe-haven demand could significantly increase, pushing gold 10%-15% higher from here.

On the flipside, widespread and sustained conflict resolution, something that appears unlikely in the current environment  would see gold give back 12%-17% of this year’s gains.

Gold closed out the first half of the year as one of the top-performing major asset classes, rising 26% over the period.

It recorded 26 new all-time highs (ATHs) in H1 2025, having broken through 40 new ATHs in 2024. Behind this was a combination of factors, including a weaker US dollar, rangebound yields with expectations of future rate cuts, heightened geopolitical tensions some of these directly or indirectly linked to US trade policy.

Stronger demand also came from increased trading activity across OTC markets, exchanges, and ETFs. This lifted average gold trading volumes to US$329bn per day during H1  the highest semi-annual figure on record. Central banks also contributed with continued buying at a robust pace  even if not at the record levels of previous quarters.

A new trade order

As the world is grappling with uncertain and confrontational trade negotiations, one of the most significant macro themes so far this year has been the underperformance of the US dollar, which had its worst start to a year since 1973.

This was also seen through the underperformance of US Treasuries, which, for more than a century, had been the epitome of safety. Yet, inflows into Treasuries faltered in April amid heightened uncertainty.

Conversely, gold ETF demand was particularly strong in the first half of the year, led by notable inflows from all regions. By the end of H1 the combination of a surging gold price and investor flight to safety pushed global gold ETF’s total AUM 41% higher to US$383bn.

Total holdings rose by an impressive 397t (equivalent to US$38bn) to 3,616t – the highest month-end level since August 2022.

Trade-related and other geopolitical risks played a large role, not just directly, but by fuelling moves in the dollar, interest rates, and broader market volatility, all of which fed into gold’s appeal as a safe-haven.

Taken together, these factors have contributed around 16% to gold’s return over the past six months, according to the Gold Return Attribution Model (GRAM)Trade-related and other geopolitical risks played a large role, not just directly, but by fuelling moves in the dollar, interest rates, and broader market volatility, all of which fed into gold’s appeal as a safe-haven.

Second Half-Analysis

Market consensus suggests global GDP will move sideways and remain below trend in the second half. World inflation is likely to rise above 5% in H2 as the global impact of tariffs becomes more pronounced with the market expecting US CPI to reach 2.9%.

In response to this mixed economic backdrop, central banks are expected to begin cautiously lowering interest rates towards the end of Q4, with the Fed expected to cut rates by 50bps by the end of the year. While an advance in trade negotiations is anticipated, the environment will likely remain volatile, as seen over the past few months.

Overall, geopolitical tensions, particularly between the US and China are likely to remain elevated, contributing to a generally uncertain market environment.

Impact of consensus expectations on gold based on Gold Valuation Framework, suggests that, under current consensus expectations for key macro variables, gold could remain rangebound in H2, closing roughly 0%–5% higher than current levels, equivalent to a 25%–30% annual return.

Technical indicators suggest that gold’s consolidation phase over the past few months is a healthy pause in a broader uptrend, helping to ease previous overbought conditions and potentially setting the stage for renewed upside.

Falling interest rates and continued uncertainty would maintain investor appetite, particularly via gold ETFs and OTC transactions.

At the same time, central bank demand is likely to remain robust in 2025, moderating from its previous records while staying well above the pre-2022 average of 500-600t.

However, elevated gold prices are likely to continue to curb consumer demand and potentially encourage recycling. This would act as a damper to stronger gold performance.

However, looking at consensus expectations often implies a rangebound performance, likely indicating that gold is efficiently reflecting all the currently available information. As such, it is important to understand the conditions that may push gold higher or lower from here.

Bull case

For gold to continue its upward trend, economic and/or financial conditions would need to deteriorate further. This could be either a more severe stagflationary environment  marked by slower growth, falling consumer confidence, and persistent inflationary pressure from tariffs, or an outright recession, characterised by widespread flight-to-quality flows.

Gold would benefit from lower interest rates and dollar weakness given growing concerns around US economic leadership and policy uncertainty. In this context, central banks could further accelerate their diversification of foreign reserves away from the dollar.

Gold would perform strongly in such an environment, potentially rising an additional 10%–15% in H2 and closing the year almost 40% higher.

As seen historically during periods of heightened risk, investment demand would significantly outweigh any deceleration in consumer demand and rise in recycling. And while flows into gold ETFs in the first half of the year have already been substantial, total holdings at 3,616t remain well below the 2020 peak of 3,925t.

Further, gold ETFs have accumulated less than 400t in the past six months and just over 500t in the past twelve. In contrast, gold ETFs have amassed between 700t and 1,100t in previous bull runs. Equally, COMEX futures net long positions currently sit near 600t, compared to levels above 1,200t during previous crises.

This all suggests meaningful room for further accumulation should conditions deteriorate.

Bear case

Sustainable geopolitical and geoeconomic conflict resolution would reduce the need to keep hedges, such as gold, part of investment strategies   encouraging investors, in turn, to take on more risk.

A full resolution of risk does not seem as likely given what have been seen over the past six months. But more encouraging economic growth prospects, even if inflationary pressures were to persist, would push US Treasury yields higher, leading to a steepening of the yield curve.

And if inflation stabilises further, the effect on rates would be more substantial.

In this scenario, gold could retreat by 12%–17% in H2, finishing the year with positive but low double-digit (or even single-digit) returns according to WGC. This pullback is equivalent to the trade risk premium that partly explains gold’s H1 performance.

The reduction in risk, combined with an increase in opportunity cost through rising yields and a stronger dollar  would trigger gold ETF outflows and reduce overall investment demand.

There could also be a likelihood of deceleration in central bank demand if US Treasuries are again favoured. Gold market technical analysis and speculative positioning suggest that US$3,000/oz would be a natural “support level”, prompting opportunistic investment buying.

If gold were to break through these levels, disinvestment may accelerate. That said, lower gold prices would attract more price sensitive consumers and discourage recycling, limiting gold’s downside compared to what may otherwise be implied by simply looking at real rates and the US dollar.

Further, It’s worth noting that historical drivers such as a major increase in interest rates from current levels or a more saturated gold investment market do not seem to be present to warrant a more extreme dip.

Therefore,  in all, given the intrinsic limitations of forecasting the global economy, gold through its fundamentals  remains well positioned to support tactical and strategic investment decisions in the current macro landscape.

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