The trends that helped propel gold to record levels this year look set to continue in 2025, according to the ‘Precious Metals Forecast 2025’ published by German precious metals trader Heraeus Precious Metals.

The report authors expect central banks to continue buying gold, although perhaps not at the very high levels seen over the last few years.

Further, exchange-traded fund (ETF) investors have returned to gold in the second half of this year, after selling down their holdings for more than two years.

Meanwhile, jewellery demand has fallen as the price has risen, but it has remained robust in India.

According to the report, if the Chinese government’s stimulus measures help to boost the economy, the two largest jewellery-buying nations could provide a solid base for demand in 2025.

However, several geopolitical risks remain, and with US President-elect Donald Trump returning to office next year, Heraeus believes there could be more uncertainty around trade and tariffs.

The report states that, globally, monetary policy has entered a rate-cutting cycle. Central banks are reducing interest rates because inflation has eased, and this is expected to support economic growth.

However, if the US Treasury yield curve is a reliable guide, as it has been in the past, then the US should be heading for a recession in 2025, the report states, which would result in more rate cuts, the probability of a weaker dollar and support for gold as real interest rates fall.

With Trump’s return to the White House, geopolitical tensions may ease if there is a resolution in Ukraine, but trade tensions could rise.

Along with investment flows, central bank gold purchases are likely to remain robust in 2025 and provide a solid base of demand, even if more price-sensitive jewellery demand declines.

However, Trump’s proposals include unfunded tax cuts, looser regulations, and trade tariffs, which could all prove to be inflationary. The US government continues to run sizeable budget deficits, and US debt is growing larger, with interest payments having increased, the report notes.

While recent rate cuts ease that pressure to some extent in the short term, there is no sign of a retrenchment in government spending. The report suggests that the US will most likely need to inflate away the debt, which will ultimately be beneficial for gold.

Investment demand for gold looks set to rise, according to the report. ETF investors added 95 t of gold to their holdings in the third quarter following nine consecutive quarters of net sales.

Heraeus explains that the knee-jerk reaction following Trump’s election win was for the dollar to strengthen and gold was sold off. This may have been an excuse for some profit-taking after a very strong run-up in the gold price.

However, in the medium term, interest rate cuts, a weaker dollar and the prospect of ongoing inflationary pressures should see more investors turn to gold as a store of value.

The report notes that central banks are expected to continue buying gold next year. In 2024, central bank gold purchases are on track for another strong year, although they may fall short of the more than 1 000 t acquired yearly in 2022 and 2023.

A World Gold Council survey cited in the report showed the highest proportion yet of central banks planning to add to their gold reserves. Interest rate levels, inflation and geopolitical issues remain the top three considerations for central banks, which means that gold purchases are likely to remain elevated in 2025.

India could reclaim the number one spot for gold jewellery demand in 2025. The report predicts that India will have the fastest growth among the large economies next year. In India, consumers have continued buying gold despite high prices, and this trend could persist as long as the economy remains robust.

However, jewellery demand in China slumped in 2024 as consumers have struggled in a challenging economic environment.

Overall, global jewellery demand is likely to dip next year as consumers are deterred by the high price. However, much will depend on whether the situation improves in China now that some stimulus measures have been introduced by the government.

Heraeus says that the gold price is forecast to trade between $2 450/oz and $2 950/oz in 2025.

The report notes that the US Treasury yield curve uninverted in September. Historically, this has been accurate in predicting recessions, although the time lag to the recession has varied.

If Trump’s policies prove inflationary but fail to stave off a recession, this could place the Federal Reserve in a difficult position, Heraeus states.

Nevertheless, the report concludes that the Federal Reserve is likely to prioritise supporting the economy and cut rates further, particularly as higher inflation helps with the US debt situation. Further rate cuts would weaken the dollar and result in real interest rates becoming less positive, which would support a higher gold price.