According to Kitco - gold prices are still forecast to reach $3,000/ounce next year. However, investors need to be patient, as the current adjustment period could last until the first half of 2025, according to Bank of America (BoA).
“Gold is currently stuck in an environment where there is no specific factor to attract investors,” Michael Widmer, head of metals research at BoA, said at the bank’s “2025 Outlook” conference last week.
The bank said gold would face headwinds in the new year, as demand from China remained weak, while Western investors faced the prospect of higher bond yields and a stronger dollar.
"The Trump administration is likely to push a series of economic policies that favor the US, through strong growth, higher inflation, higher interest rates and a stronger US dollar, which could limit investor demand for gold in the short term," analysts wrote in the report.
BoA strategists predict that potential trade tariffs and other US-preferred economic policies could cause the US Federal Reserve to slow its easing cycle in 2025. The Fed is expected to make only two rate cuts next year, one in March and the other in June.
Positive outlook for gold, despite challenges
Despite the challenges, BoA precious metals analysts expect gold and silver prices to receive strong support in the new year, as economic and geopolitical uncertainty boosts demand for safe-haven assets.
In its outlook report, the bank forecast an average gold price of around $2,750 an ounce in 2025, unchanged from its previous forecast.
While the US economy may show resilience next year, analysts highlight the government's growing debt as a key factor that could support gold prices.
“We remain concerned about the uncertain macroeconomic environment and the fiscal outlook,” the analysts said. “The national debt is projected to reach record highs relative to the size of the economy over the next three years, well into the next presidential term.
Central banks remain large holders of government bonds, and the fiscal outlook provides a strong incentive to further diversify reserves into gold, which is a popular choice."
Central bank support and the de-dollarization trend
While investment demand may struggle in the first half of 2025 as the market adjusts to the Fed's monetary policy, Widmer said central banks are expected to continue buying gold and supporting prices.
He also highlighted the risk of rising US budget deficits on the global de-dollarization trend. "If you want to preserve your assets and are concerned about the risk from the asset class that you rely on the most, it is natural to look for other investment options," he said. "Gold is still one of the few assets that banks can hold to diversify their portfolios."
With the focus on central bank demand, the market is paying particular attention to the People’s Bank of China, which ended an 18-month streak of gold purchases in April but increased its reserves after six months, adding 5 tonnes in November.
