2025 Gold Forecast: Bulls vs. Bears On The Metal's Journey

Gold's surge in 2024 till October 2024 of 35% surge was the best performance in 4 decades. Despite a drop of 5% in October 2024, gold remained buoyant with 28% returns for the year.

What's in store for 2025?

The US FED lowered rates by 25 bps but trimmed rate cut expectations for 2025. It assumes a slower monetary easing in 2025. The US Dollar Index strengthened further with an edge to the higher treasury yields. Gold tumbled overnight by 2% and dived to $2584 before recovering beyond $2600.

Technical levels keenly watched by markets are $2634 and a breach could trigger a significant selling spree. However, once $2674 on the upside is established it forms a secondary resistance for it to rally further to $2725, $2780 and $2840.

Current COMEX levels of $2631 or MCX futures Rs.76214 have to break Rs.77450 / $2674 for further upside. MCX futures would then rally further to Rs.78000 and Rs.79200. However, this seems improbable given the USD strength and slower monetary easing by US FED in 2025.

Hence the downside is on the cards for now. MCX futures support levels of Rs.76500, Rs.75200 and Rs.74000 could soon see these lower levels.

Key Positive Drivers

CME will launch a one-ounce gold futures contract in January to meet growing demand from retail investors amid bullion's record-breaking rally.

Central banks worldwide have significantly increased their gold purchases to protect against external shocks in an increasingly uncertain global environment. India added 77 tons this year. China holding has increased to 72.96 million ounces, diversifying reserves and protecting against currency depreciation.

The recent geo-political tension with Syria is supporting gold's appeal as a safe-haven investment. President Assad's collapse, paved the way for the resurgence of Islamic extremism in Damascus heightening concerns about regional instability, as also warned by the U.S. President Joe Biden.

US Dollar - The Bottleneck

The trend of FED in the monetary easing would be cautious as observed by the CPI reading of inflation at its strongest level. Gold gains are constrained due to strength in the dollar (Dollar Index 107.50 - 108.00 range), increasing doubts over the long-term outlook for inflation and interest rates.

Gold's weight in the Bloomberg Commodity Index (BCOM out of 24 commodities) will decrease to 14.29% in 2025 (3rd consecutive year drop) during the annual reconstitution, reflecting a decline in trading volumes over the past few years, despite a price rally. This could be an indicator of limiting further volume trades in gold.

China's policy shift may weaken the yuan, fueling risk aversion and increasing demand for the dollar. China will adopt an "appropriately loose" monetary policy in 2024, marking its first shift toward easing since 2010 to support economic growth, with plans to implement a proactive fiscal policy, intensify "unconventional" counter-cyclical measures, and prioritize boosting consumption and expanding domestic demand.

The Yuan's decline could further get triggered through US tariffs. Countries tolerating weaker currencies to stay export-competitive could drive the dollar higher crossing the 2011 peak.

The U.S focus on tariffs, growth-driven fiscal agenda, tax cuts and deregulation, is boosting U.S. yields and dollar demand pressurizing precious and base metals. Trade-exposed economies facing currency pressure add to the dollar appeal.