Cilliers added that gold was also being buoyed by a World Gold Council report that major central banks were expected to increase gold purchases this year. REUTERS/Rick Wilking/File Photo
Nicola Mawson
Gold started 2025 with a bang, notching a gain of as much as 1% so far this year, before closing somewhat lower on Friday when compared with the last day of 2024.
The precious metal could also break through the $3 000 (R56 136) mark, having closed at $2 638.30 on Friday.
“Gold markets have had a very strong 2024 and I think we’re entering a phase where gold very well could start to go sideways for a while,” Christopher Lewis, FXEmpire analyst, said on Friday.
“Gold breaking above the $2 800 level would change everything though, and should send it towards the $3 000 level, which I wouldn’t be surprised to see happen sometime during 2025.”
The yellow metal has been boosted by expectations of sustained central bank purchases this year, along with safe-haven demand due to ongoing global geopolitical unease, which underpin the price, said Andre Cilliers, currency strategist at TreasuryONE.
Cilliers added that gold was also being buoyed by a World Gold Council report that major central banks were expected to increase gold purchases this year.
On Friday, Taylor Burnette, research lead of Americas at the World Gold Council, said that gold outperformed all major asset classes and was proving to be a strong portfolio diversifier in 2024.
He posted in a blog that gold rose 25.5% in 2024, which he said was “likely due to its role as an effective hedge against the heightened geopolitical uncertainty and market volatility experienced this year”.
The World Gold Council’s Gold Return Attribution Model indicated that gold’s positive performance was linked to factors including:
Yet, Burnette said that market consensus expectations suggested a more modest performance for gold in 2025, but with the potential for upside catalysts as the year unfolds.
Joseph Dahrieh, managing principal at Tickmill, stated that gold has “found support throughout 2024 thanks to expectations of decreasing interest rates, strong central bank buying activity, and heightened geopolitical tensions that pushed demand for the precious metal and its prices to record highs”.
The market, he said, was currently keeping an eye on the US interest rate trajectory, particularly following Federal Reserve (Fed) chairman Jerome Powell’s recent signals of increased caution regarding the pace of monetary policy easing. These considerations come amid renewed concerns about inflation.
“Looking ahead, gold’s outlook appears promising, supported by several fundamental factors,” said Dahrieh.
“These include ongoing geopolitical uncertainties, expectations of continued central bank purchases, and the metal's traditional role as a safe-haven asset during periods of market uncertainty.”
He added that while potential headwinds such as dollar strength and the pace of interest rate adjustments may present challenges, the overall market sentiment suggested sustained support for gold prices, especially as investors sought to balance their portfolios against various economic and political risks.
Investec chief economist, Annabel Bishop, also noted that the Fed now anticipated inflation to push higher from an initial prediction of 2% year-on-year as of September to 2.5% now. This, she said, was a concern for markets.
Bishop added that financial markets now only expected one cut in the US interest rate cycle in June versus a previous forecast of three: one this month, June, and a third in October.
“Fewer US interest rate cuts are supportive of a stronger US dollar,” said Bishop.
BUSINESS REPORT