Gold outlook Q1 2025

Gold prices experienced significant volatility and notable developments during the final quarter of 2024, driven by a mix of economic and geopolitical factors. The critical question remains: will gold prices rebound and hit record levels, or will global conditions continue to pressure the yellow metal?

Significant milestones in 2024

Over the course of 2024, gold demonstrated impressive growth, rising by 12% in the first half alone. In October 2024, it reached an all-time high of $2,790 per ounce, marking a significant milestone in its market performance.

By the end of the year, the precious metal surged more than 28%, driven by strong demand and favorable market conditions. Notably, total gold demand in the third quarter surpassed $100 billion for the first time in history, further highlighting its increasing appeal.

Throughout 2024, gold outperformed most other asset classes, cementing its position as a top performer in the global markets.

However, gold dropped by over 7% from its peak in the fourth quarter of last year, burdened by a series of factors, with the key catalyst being Trump's victory in the U.S. presidential election. This win implies expected shifts in fiscal policies and potential adjustments to monetary policies in the United States.

Why did gold decline in Q4?

After a remarkable performance in the earlier part of 2024, gold faced a decline in the fourth quarter. Several factors contributed to this shift, ranging from changes in U.S. monetary policy to improved geopolitical stability. As market conditions evolved, gold’s status as a safe-haven asset was increasingly challenged by a combination of economic and political developments.

Fed’s interest rate policy

One of the key reasons for gold’s decline in Q4 was the shift in the Federal Reserve’s stance on interest rate cuts.

Gold prices had climbed sharply earlier in the year due to aggressive rate cuts by major central banks, particularly the Fed.

However, the Fed’s recent meeting dampened expectations for substantial rate cuts in 2025, increasing pressure on gold.

Strength of the USD

The US dollar index rose, supported by strong economic data and delayed rate cut expectations for 2025. A stronger dollar makes gold more expensive for investors using other currencies, reducing demand.

Easing geopolitical tensions

Geopolitical risks have somewhat stabilised as several key conflicts showed signs of de-escalation, lessening gold’s appeal as a safe-haven asset.

Improving U.S. economy

Positive economic indicators reflect robust U.S. economic performance. For example, the services sector reported its fastest growth in four years. Investors have shifted towards higher-risk assets, steering away from gold.

Gold in Q1 2025: What to expect

Political transition to Donald Trump

Gold prices may experience volatility in January as Donald Trump assumes office later in the month.

Markets will likely remain cautious, awaiting clarity on Trump’s political and economic agendas, particularly regarding trade relations with China and the European Union, as well as potential tariff policies hinted at during his campaign.

Central banks increasing gold reserves

Central banks worldwide are bolstering their gold reserves as a hedge against economic shocks and a strategy to reduce reliance on the U.S. dollar.

According to the World Gold Council, 24% of central banks plan to increase their gold reserves.

Notable purchases:

China: In November 2024, China resumed gold purchases after a six-month hiatus, bringing its reserves to a record 2,264 tons.

India: The Reserve Bank of India added 27 tons of gold to its reserves in September, totalling 54 tons for the year.

Turkey and Eastern Europe: Turkey acquired approximately 45 tons of gold in the first half of 2024, while the Czech Republic committed to increasing its gold reserves by 100 tons over the next three years.

Will gold hit record highs in 2025?

Despite challenges like a strong U.S. dollar and postponed rate cuts, these factors are not the sole determinants of gold’s performance. Other key drivers, such as geopolitical tensions and central bank gold purchases, could support further price increases.

Many major financial institutions predict gold prices will continue climbing, potentially surpassing the $3,000 per ounce mark.

However, China’s aggressive economic stimulus measures aimed at boosting growth could shift investor focus towards equities and real estate, reducing demand for gold as a safe-haven asset.

While the path to record highs is not without obstacles, gold remains well-positioned for significant gains in 2025, contingent on global economic and geopolitical developments.

Technical overview of price movements

Gold recorded significant movements in the last quarter, reaching a historic peak near the $2,790.00 level in late October. From this area, the price began a noticeable decline, breaking through the support level at $2,600.00 and recording a low around $2,537.00. Subsequently, gold underwent a limited upward correction but encountered strong resistance at $2,720.00, a level the price tested multiple times without successfully surpassing.

Currently, gold is forming a symmetrical triangle pattern on the medium-term chart, with the lower boundary of the pattern situated around $2,600.00. If this level is broken, additional declines are expected, potentially reaching levels of $2,580.00 and $2,537.00. A break below $2,537.00 could lead to further declines, shifting the structure into a bearish trend towards $2,470.00.

In the short term, the price faces resistance at $2,666.00, and if breached, the upward movement could extend to test the upper boundary of the symmetrical triangle and the strong resistance level at $2,720.00. Surpassing this level could pave the way for a retest of the historic peak at $2,790.00.

However, a break below the $2,600.00 support level and a move below $2,537.00 would confirm the likelihood of a continued downtrend in the medium term, making the bearish scenario the most likely for now.