(Kitco News) - Gold is still on track to hit $3,000 an ounce next year, but investors will need to be patient, as the current consolidation period could last through the first half of the year, according to Bank of America.
"Right now, gold is just stuck in an environment where we don't have anything tangible to get investors back into the market," said Michael Widmer, BoA's head of metals research during its 2025 Outlook webinar last week.
America's second-largest bank noted that gold faces significant headwinds in the new year as Chinese demand remains lackluster and Western investors contend with potential higher bond yields and a stronger U.S. dollar.
"The Trump administration will, in all likelihood, push through a policy mix that, through stronger growth, higher inflation, higher rates, and a stronger USD, might well limit the appetite of investors to increase gold purchases in the near term," the analysts said in the report.
The bank's fixed-income strategists anticipate that potential trade tariffs and other America-first economic policies could prompt the Federal Reserve to slow its easing cycle in 2025. The analysts expect only two rate cuts next year, one in March and another in June.
Despite the challenges, precious metals analysts expect gold and silver to gain solid support in the new year, driven by economic uncertainty and geopolitical turmoil fueling safe-haven demand.
In its outlook, the bank projects gold prices to average around $2,750 an ounce in 2025, unchanged from its previous forecast.
While the U.S. economy may demonstrate resilience next year, the analysts highlighted the government's burgeoning debt as a major factor that could support gold prices.
"We remain concerned about an uncertain macro environment and also the fiscal outlook," the analysts said. "The national debt is projected to reach a new record high as a share of the economy within the next three years, well within the next presidential term. Central banks remain large holders of government bonds, and the fiscal outlook provides a strong incentive to further diversify reserves and add gold, which has been a popular trade."
Although investment demand may struggle in the first half of 2025 as the market adjusts to the Federal Reserve's monetary policy, Widmer noted that there are expectations for central banks to continue buying gold and supporting prices.
He added that it is difficult to overstate the risks posed by the growing U.S. deficit on the ongoing de-dollarization trend.
"If you're in the business of preserving wealth and there's concern about the asset you're most exposed to, that certainly opens up the possibility of more diversification," he said. "There are not that many assets banks can hold other than gold."
With a significant focus on central bank demand, markets are paying particular attention to the People's Bank of China. The central bank ended an 18-month shopping spree in April but increased its reserves six months later, buying five tonnes of gold in November.
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