A fine line influenced by rates, risk, and growth
Gold is poised for its best annual performance over a decade – up 28% through November. Behind this, central bank and investor buying have more than offset a notable deceleration in consumer demand. Asian investors have been a near-constant presence, while lower yields and a weakening US dollar in Q3 fueled Western investment flows. However, gold’s role as a hedge amidst rising market volatility and geopolitical risk most likely explains its remarkable performance.
As we look forward, all eyes are focused on what Trump’s second term may mean for the global economy. Thrill-seeking investors may benefit from an early wave of risk-on flows, but potential trade wars and inflationary forces may spill over into an expected subpar economic growth.
If taken at face value, the market consensus of key macro variables such as GDP, yields, and inflation suggests positive but much more modest growth for gold in 2025. The upside could come from more substantial than expected central bank demand or rapid deterioration of financial conditions that lead to flight-to-quality flows. Conversely, a reversal in monetary policy, leading to higher interest rates, would likely bring challenges. In addition, China’s contribution to the gold market will be key: consumers have been on the sidelines while investors have provided support. However, these dynamics hang on to the direct (and indirect) effects of trade and the stimulus and perceptions of risk.
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https://www.gold.org/goldhub/research/gold-outlook-2025
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