What is happening to global gold prices? How should investors respond in 2025

By the end of 2024, entering 2025, the global gold price trend has become a market focus. After breaking through $4,400 in October to hit a record high, there was a pullback, but is this wave really over? Many investors are watching — Is it still worth entering now?

To answer this question, one must first understand the real reasons behind the global gold price increase.

Why did the global gold price hit new highs in 2024-2025?

According to Reuters, the current gold rally has approached the highest levels in nearly 30 years, surpassing 31% in 2007 and 29% in 2010. This is not accidental; three main forces are driving it:

First Force: Policy Uncertainty Sparks Safe-Haven Sentiment

A series of tariff policy adjustments in early 2025 directly triggered market safe-haven demand. When the policy environment is full of variables, investors naturally turn to “safe assets” like gold. Historical experience (referencing the US-China trade war in 2018) shows that during periods of policy uncertainty, gold prices often experience short-term surges of 5-10%. The current situation confirms this pattern.

Second Force: Federal Reserve Interest Rate Policy Changes

This is key to understanding global gold price fluctuations. According to CME interest rate tools, the probability of the Fed cutting interest rates by 25 basis points in December is as high as 84.7%.

Why is the Fed’s stance so important? Because gold prices have a clear negative correlation with real interest rates — when rates fall, gold rises. The logic is simple: when savings yield nothing, assets like gold that do not generate interest but can preserve value become more attractive.

Looking back at the September FOMC meeting, although the Fed cut rates by 25 basis points as expected, Powell did not hint at continued rate cuts, instead describing this move as “risk management easing.” This ambiguous attitude caused gold to spike and then retreat — the market became cautious about subsequent rate cut steps.

Third Force: Continued Central Bank Gold Purchases

According to the World Gold Council (WGC), in Q3 2025, global central banks net purchased 220 tons of gold, a 28% increase from the previous quarter. In the first nine months, total gold purchases reached about 634 tons, slightly below the same period in 2024 but still far above other periods.

More notably, a WGC survey in June showed that 76% of responding central banks expect to increase their gold holdings over the next five years, and most expect the dollar reserve ratio to decline. This reflects rising global trust in gold as a reserve asset.

Other factors boosting global gold prices

Besides the three main drivers above, the following factors are also contributing:

Expectations of monetary easing amid high debt levels

By 2025, global debt has reached $307 trillion (IMF data). High debt levels mean central banks lack flexibility in interest rate policies, tending to maintain easing policies, which suppress real yields. In this environment, gold’s safe-haven and preservation value become more prominent.

Uncertain US dollar trend

When market confidence in the dollar wanes and the dollar remains under pressure, gold priced in USD effectively becomes cheaper, attracting more international capital.

Persistent geopolitical risks

The Russia-Ukraine war continues, tensions in the Middle East persist, and these uncertainties strengthen investors’ demand for safe assets.

Market sentiment-driven short-term capital inflows

Social media and news bombardment ignite investor sentiment, leading to large short-term capital inflows into gold, further pushing up prices. But it’s important to recognize — such price surges driven by capital inflows are often unsustainable.

How do authoritative institutions view the future?

Despite recent fluctuations, many well-known institutions remain optimistic about the long-term outlook for global gold prices:

• JPMorgan considers this correction a “healthy adjustment,” raising its Q4 2026 target price to $5,055 per ounce
• Goldman Sachs reaffirms its target of $4,900 per ounce by the end of 2026
• Bank of America is more aggressive, raising its 2026 target to $5,000, even hinting at a potential breakthrough to $6,000 next year

Jewelry retail performance also reflects market confidence — brands like Chow Tai Fook, Luk Fook Jewelry, and Chow Sang Sang’s gold jewelry prices remain above 1,100 RMB/gram, with no significant decline.

Is it still a good time to buy? Different investors’ strategies

Advice for short-term traders

If you have trading experience, the current volatility offers many opportunities. Market liquidity is ample, and the direction of rise or fall is relatively easier to judge, especially during sharp surges or drops, where bullish or bearish momentum is clear. But you must balance technical analysis with fundamentals.

Use economic calendars to track US economic data releases; volatility often peaks around these times, making them ideal for short-term operations.

Advice for beginners

If you’re new and want to try short-term trading, remember: start with small capital, never blindly add. Gold’s average annual volatility is 19.4% (higher than the S&P 500’s 14.7%), so don’t underestimate its fluctuations. Once the market moves against you, it’s easy to lose confidence and end up with significant losses.

Advice for long-term investors

Planning to buy physical gold as a long-term store of value? Be prepared for large fluctuations. Although the long-term trend is upward, the process may see doubling or halving, and it takes over 10 years to see clear gains. Additionally, physical gold has relatively high transaction costs (5-20%), which should be considered.

Advice for asset allocators

Including gold in your portfolio is feasible, but don’t forget — gold’s volatility is comparable to stocks. Putting all your assets into gold is not wise; diversification remains the key.

Advice for aggressive investors

If you want to maximize returns, consider a long-term holding combined with short-term swing trading strategy. Price swings tend to amplify around US market data releases, presenting short-term opportunities. But this requires substantial experience and risk management skills.

Three key points to remember

1. Gold’s volatility is not less than stocks — annual average volatility of 19.4% vs. 14.7% for S&P 500, quite significant

2. Gold investment cycles are very long — as a store of value, a 10-year horizon reveals the truth, but within that period, large ups and downs are possible

3. Don’t concentrate all your funds — high transaction costs and volatility mean diversified assets are a more prudent choice

In short, the logic behind the rise in global gold prices is clear, and the medium- to long-term support factors remain unchanged. But short-term fluctuations do pose risks, especially around US economic data releases and Fed meetings. Whether entering or adding positions, decisions should be based on your risk tolerance and investment horizon, avoiding blindly following the crowd.