JOHANNESBURG (miningweekly.com) – Gold enters the second half of 2025 coming off an exceptionally strong start to the year – up 26% – shaped by a weaker US dollar, persistent geopolitical risk, robust investor demand, and continued central bank purchases, the World Gold Council says in its mid-year outlook report published on Tuesday, July 15.

While some of these drivers are expected to persist, the path forward remains highly dependent on multiple factors, including trade tensions, inflation dynamics, and monetary policy.

Consensus expectations suggest a relatively steady finish for gold with moderate upside potential if macro conditions hold.

Gold could also be partly supported by contributions from new institutional investors, such as Chinese insurance companies.

A more volatile geopolitical and geoeconomic scenario could push gold significantly higher, particularly if more substantial stagflation or recession risks materialise and investor appetite for safe-haven assets grows.

On the flip side – while seemingly unlikely given the current environment – widespread and sustained global trade normalisation would bring higher yields and resurgent risk appetite, challenging gold’s momentum. Gold could also be tested by a visible deceleration in central bank demand beyond current expectations.

“In all, given the intrinsic limitations of forecasting the global economy, we believe that gold – through its fundamentals – remains well positioned to support tactical and strategic investment decisions in the current macro landscape,” the council report to Mining Weekly concluded.

The first half gold price rise of 26% in US dollar terms is put down to a combination of a weaker US dollar, rangebound rates and a highly uncertain geoeconomic environment resulting in strong investment demand.

The second half of 2025 “sits on a seesaw”, with geoeconomic uncertainty keeping investors on edge, with concerns remaining that conditions could deteriorate quickly.

“Dollar-related pressures are likely to persist, and questions around the end of US exceptionalism may dominate investor discussions. Overall, these conditions position gold as a net beneficiary – but while the fundamentals remain strong, the gold price has already captured part of these dynamics. In turn, sustainable conflict resolution and continued rising stock prices could lure more risk-on flows and limit gold’s appeal,” was some of the commentary on second-half possibilities.

To assess the effect of such varied conditions, gold’s four key drivers – economic expansion, risk and uncertainty, opportunity cost, and momentum – across three scenario were looked at by the council’s team of gold specialists, who outline gold possibilities through research, analysis, commentary and insights.

Market consensus suggests global GDP will move sideways and remain below trend in the second half, when world inflation is positioned to likely rise above 5% as the global impact of tariffs becomes more pronounced amid market expectation that the US CPI will reach 2.9%.

In response to this mixed economic backdrop, central banks are foreseen to begin cautiously lowering interest rates towards the end of the fourth quarter, with a probable 50 basis point US Federal Reserve rate cut by year-end.

While an advance in trade negotiations is anticipated, the environment will likely remain volatile, as has been seen over the past few months. Overall, geopolitical tensions – particularly between the US and China – are likely to remain elevated, contributing to a generally uncertain market environment.

Technical indicators suggest that gold’s consolidation phase over the past few months is a healthy pause in a broader uptrend, helping to ease previous overbought conditions and potentially setting the stage for renewed upside.

Falling interest rates and continued uncertainty would maintain investor appetite, particularly through gold exchange-traded-fund and over-the-counter transactions. At the same time, central bank demand for gold is likely to remain robust in 2025, moderating from its previous records while staying well above the pre-2022 average of 500 t to 600 t of gold uptake.

However, the World Gold Council mid-year outlook report propounds that elevated gold prices are likely to continue to curb consumer demand and potentially encourage recycling, which would deter stronger gold performance.