Gold’s rally could extend through 2025 on the back of falling rates and persistent central bank demand.
“Since 2022, gold prices have surged 40% even as US interest rates were climbing,” points out Lina Thomas, commodities strategist with Goldman Sachs Research. “That is very strange. Typically, higher interest rates make gold less attractive – because gold doesn’t pay any interest, unlike bonds.”
However, this relationship changed dramatically in early 2022. Thomas notes that this is when the US and other Western countries reacted to Russia’s invasion of Ukraine by freezing Russia’s central bank assets.
“That was a wake-up call for central banks worldwide,” Thomas says. “They began to diversify their reserves away from the dollar and into an asset no one can freeze – and that is gold.”
So even as investors sought out higher yields elsewhere, central bank buying buoyed gold.
“We don’t see central bank demand slowing down,” Thomas says. “And with the Fed cutting rates, investors are jumping back in, too.”
As a result, Thomas forecasts that gold will rise to $3,000 per troy ounce by the end of 2025.
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