Gold brought a smile to investors' faces in 2025: What is expected for gold in the new year?

Throughout the past year, gold prices provided investors with gains at a rate not seen in recent years. Closing 2025 with a 64.2 percent increase, gold bullion offered its highest annual return since 1979. In an environment where global economic uncertainties and geopolitical developments have come to the fore, gold once again stood out as an indispensable safe haven for portfolios.

Large-scale gold purchases by central banks and the 75 basis point interest rate cuts implemented by the US Federal Reserve (Fed) were among the main factors supporting the upward movement of gold prices. Financial circles predict that the Fed will continue to cut interest rates in the coming period. Furthermore, US President Donald Trump's strong advocacy for interest rate cuts continued to fuel demand.

Geopolitical risks, such as the escalating tension between the US and Venezuela and the ongoing Russia-Ukraine conflict, were also effective in the steady rise of gold prices. The move by central banks to diversify their reserves by shifting away from the dollar also played an important role in this process. In particular, granting pension funds in India the right to invest in gold and silver ETFs increased interest in precious metals.

Entering 2025 at the $2,623 level, gold bullion rose on a monthly basis in almost every month of the year. Recording a decline of only 0.39 percent in July, the ounce price of gold reached a new historical peak of $4,549.94 in December and finished the year at $4,313. Having provided a 126.5 percent return in 1979, gold attracted attention with such a high increase for the first time in a long while.

REASONS FOR THE RISE IN GOLD

Capital.com Senior Financial Markets Analyst Kyle Rodda stated, 'Several factors are playing a role in the rise of gold. These are US interest rate cut expectations, geopolitical risks, threats to the Fed's independence, global financial conditions, and US trade policy.'

Rodda noted that central banks are moving away from the dollar and increasing gold purchases to diversify their reserves. Explaining that investors are reacting to the Fed's potential interest rate cuts in response to inflation running above targets and expansionary fiscal policies, Rodda said, “Since the short-term trajectory of gold is linked to policies, any reversal in the gold market could stem from changes in policy. Until then, even if technical indicators signal that the market is in overbought territory, the fundamental indicators for gold are bullish.”

Tim Waterer, Chief Market Analyst at Australia-based KCM Trade Global, made the following assessment: 'Central banks continue to buy gold for diversification purposes, moving away from the dollar.' Waterer pointed out that gold has become a store of value for investors due to a lack of confidence in currencies in the foreign exchange markets.

News Source: 12punto