On Thursday, spot gold hit a new day's record high of $3,057.95 an ounce, but the market saw continued profit-taking over the weekend.
In the latest study, analysts at Metals Focus said gold remains an attractive safe haven asset as US President Donald Trump continues to promote the "America First" policy and global import tariffs on April 2.
However, analysts also note that at some point, geopolitical tensions and economic uncertainty will stabilize, and demand for safe-haven assets will begin to decline.
There is a risk of further escalation in the trade war between the US and key trading partners, which could increase concerns about recession. With the current weak sentiment, another correction in the global stock market, especially in the US, cannot be ruled out.
In this context, gold investment flows may continue from institutional investors looking for portfolio diversification in the coming weeks, the study points out.
However, as we enter the second half of 2025, the reason for investing in gold will become less attractive. This is mainly based on the assumption that financial markets will have more clarity on tariffs.
Our baseline scenario also assumes that the US economy will avoid recession this year. When investment flows into gold slow down, this will create downward pressure on gold," said analysts.
Although the research firm predicts gold prices will peak in the first half of the year, it does not expect to see significant weakness afterwards as the market is still well supported.
US rapidly changing policy will keep financial market volatility high. Strong buying of gold from the official sector is also expected to continue in the near future. All of these factors will help keep gold prices high throughout the year, the analysts said.
Metals Focus said gold prices could also receive additional support from the US Federal Reserve (FED) even as the central bank continues to maintain a neutral monetary policy stance on Wednesday.
In updated economic forecasts, the FED continues to show that it will cut interest rates twice this year. At the same time, they lowered their growth forecast for this year to 1.7%, down from the 2.1% forecast for December. The committee also adjusted the inflation forecast to 2.8%, from the previous 2.5%.
Although the Feds latest forecast (a 50 basis point cut in 2025) is somewhat more drastic than the markets current expectations, falling interest rates will still support gold prices.
With inflation expectations rising amid tax concerns, this will lead to further declines in real interest rates, reducing the opportunity cost of holding gold, said analysts.
Metals Focus is currently maintaining its initial gold price forecast for 2025. They predict gold will trade in a range of $2,300 to $3,000/ounce, with an average price this year of about $2,600/ounce.
Although Metals Focus does not expect the US economy to fall into recession, the District Reserve's GDP index of Atlanta continues to show an economy narrowing by 1.8% in the first quarter of this year.
