(Kitco News) - Volatility in gold remains elevated as the precious metal continues to react to shifting geopolitical uncertainty surrounding President-elect Donald Trump’s incoming administration. However, one market analyst continues to expect gold’s broader uptrend to resume through 2025.
In a recent interview with Kitco News, Nitesh Shah, Head of Commodities & Macroeconomic Research at WisdomTree, said that he expects both the U.S. dollar to move lower in 2025, providing a tailwind for gold.
He added that although Trump’s America-First policies could provide some support for the greenback early in the year, it will be difficult to maintain that momentum as the government’s deficit continues to grow.
“In all likelihood, debts are going to increase and that should soften the dollar,” he said.
At the same time, Shah said that the Federal Reserve’s easing cycle should help to push bond yields lower, another positive factor for higher gold prices.
“Now that we are back to a rate-cutting environment, bonds yields have fallen, and investors are ready to buy gold again,” he said in his latest research note.
Although Shah is bullish on gold, he also sees an upside limit to prices next year. Shah sees gold prices trading around $2,850 an ounce by the fourth quarter of next year.
“It is still a fairly constructive setup for gold,” he said. “Initially, I did have a $3,000 forecast, but according to my updated modelling, it would require bond yields to come down a fair chunk from where we are today.”
Although bond yields are expected to go lower, Shah said that there is a limit on how far the Federal Reserve can drop interest rates in the new year. He added that he currently expects rates to bottom out between 3.25% and 3.50%.
He pointed out that many of Trump’s proposed policies, including extended tax cuts, are seen as inflationary. At the same time, lower tax rates would also increase the government debt.
Looking beyond U.S. monetary policy, Shah said that he is also bullish on gold as geopolitical uncertainty continues to support the de-dollarization trend in global financial markets. Although central bank gold purchases could slow compared to recent years, Shah said that he still expects they will continue to increase their exposure to the precious metal.
Specifically, Shah said that he is looking for China to reenter the market.
“It's not an if, it's a when and quite frankly, I don’t think they can wait for much lower prices because they could end up waiting forever,” he said. “China still has a relatively low amount of gold relative to other FX assets and they will want something higher if they don’t want to be beholden to other [Group of 7] economies.”
At the same time, Shah said that in a world of growing uncertainty gold will remain an important safe-haven asset.
