Gold is poised for a potential record-breaking rally in 2025, fueled by anticipated Federal Reserve interest rate cuts and continued central bank gold acquisitions, according to Macquarie Group Ltd. While the precious metal might face headwinds in the first quarter of 2025 due to a stronger US dollar, analysts, including Marcus Garvey, predict an extension of gains thereafter, revising their price forecasts upwards. A surge in Chinese demand or potential deterioration in the US fiscal outlook under the incoming Trump administration could further propel gold prices towards $3,000 an ounce.
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Gold’s Stellar 2024 Performance Sets the Stage for Future Gains
Gold has shone brightly in the commodities market in 2024, boasting a remarkable 28% rally and achieving successive record highs. This impressive performance is attributed to a confluence of factors, including robust central bank buying, the Federal Reserve’s shift towards lower interest rates, and a resurgence in gold-backed exchange-traded fund (ETF) holdings. Prominent financial institutions like Goldman Sachs Group Inc. and UBS Group AG have also echoed the sentiment of further gold price appreciation in 2025.
ETF Holdings and Falling Interest Rates: Key Drivers for Gold’s Ascent
Macquarie analysts highlight the significant potential for increased gold ETF holdings. Current ETF holdings remain 25% below their 2020 peak, suggesting substantial room for further investment if market conditions remain favorable. Declining interest rates are identified as a crucial catalyst, potentially diminishing the attractiveness of money-market funds and other savings instruments, thereby driving investors towards gold.
Macquarie Revises Gold Price Forecasts Upwards
Macquarie has adjusted its gold price projections for 2025, anticipating an average price of $2,650 per ounce in the first quarter, a modest 1.9% increase from their previous estimate. However, a more significant upward revision is expected for the second quarter, with an average price of $2,800 per ounce, a substantial 12% increase from their earlier forecast. While acknowledging the potential for some of gold’s luster to fade in the latter half of the year, the overall outlook remains bullish. At the time of reporting, spot gold was trading around $2,649.
