"As central banks continue to buy aggressively, the US Federal Reserve cuts interest rates and geopolitical tensions persist, the precious metal is poised for a rally that could shatter previous records," said Nigel Green, CEO of DeVere Group, an independent UK-based financial management and advisory firm.
DeVere Group CEO's optimistic outlook is driven by three key factors affecting global markets:
Central bank buying surges
Global central banks are buying gold at an unprecedented pace, a trend that began after the Russia-Ukraine conflict and has expanded as countries shift away from dollar-denominated assets.
“Gold purchases have now surged to almost three times their pre-2022 levels and the outlook suggests continued strong demand into 2025,” Green said.
According to Green, this buying wave is not just about portfolio diversification but also a strategic move to reduce risk. Countries, especially those wary of US financial sanctions, are increasingly turning to gold to protect their reserves from political and economic pressure.
Taking China as an example, Green said: “In 2023, the Chinese central bank increased its gold reserves for 10 consecutive months, underscoring the country’s intention to reduce its dependence on the US dollar amid rising geopolitical tensions with the West.”
“This buying intensity continues into 2024, with net purchases of 290 tonnes recorded in Q1/2024 – the fourth strongest quarter since the buying streak began in 2022,” he said.
Countries such as Türkiye, Singapore, Brazil and India are also increasing their gold reserves to protect against currency fluctuations and potential sanctions.
The Fed's interest rate cut
The Fed's shift from aggressive rate hikes to potential cuts is another important factor that could push gold prices higher.
“Higher interest rates make gold less attractive because it does not generate a yield. However, as interest rates are set to fall, the situation is changing. Lower interest rates can often reduce the appeal of yield-yielding assets, drawing some investors – both retail and institutional – back into the gold market,” Green said.
Geopolitical tensions
In the current fragile global environment, gold's role as a hedge remains important as the risk of geopolitical shocks - including trade wars, sanctions and rising global tensions - remains significant, Green said.
Gold offers unparalleled protection in such scenarios, especially as concerns rise around issues such as Fed independence, global debt sustainability and financial sanctions.
One scenario that could send gold prices soaring is an escalation in financial sanctions similar to the increase seen since 2021. Another potential trigger could be worsening debt concerns in the US.
In this context and if the current bullish momentum is maintained, we could see gold prices hitting new record highs in the first quarter of 2025,” he said.
According to Kitco, the world gold price recorded at 5:00 a.m. on December 9, Vietnam time, was at 2,632.81 USD/ounce. It is forecasted that the gold price may increase to 2,800-3,000 USD/ounce in 2025.
