(Kitco News) – A bullish macro picture combined with continued geopolitical risk and strong sovereign buying will drive gold prices to new highs in 2025, according to ING.
“Gold has been one of the best performers among major commodities this year,” wrote commodities strategist Ewa Manthey in ING’s 2025 gold forecast. “The precious metal has surged more than 25% year-to-date, hitting a series of records on the way, supported by rate-cut optimism, strong central bank buying and robust Asian purchases. Safe-haven demand amid heightened geopolitical risks as well as uncertainty ahead of the US election in November have also supported gold’s record-breaking rally this year.”
The start of the Fed’s rate-cutting cycle gave gold a significant boost in 2024. “The Federal Reserve implemented its highly-awaited interest rate cut on 1 September, its first since March 2020, clipping rates by 50bp and providing a tailwind to gold prices,” she said. “Another 25bp came at the Fed’s November meeting, leaving the target range for the federal funds rate at 4.5-4.75%.”
“The main question for the gold market now is the pace at which the Fed will ease its policy following Donald Trump’s win in the US presidential election; the inflationary impact of Trump’s policies could lead to fewer rate cuts than previously expected,” Manthey added. “Our US economist, James Knightley, thinks that the US central bank will cut by 25bp again in December – but the outlook thereafter is less clear, and there is a strong chance of a pause at the January FOMC meeting.”
Knightly has lowered his 2025 rate cut forecast from 50bp to 25bp per quarter beginning in Q1 2025, with rates bottoming at 3.75% in Q3 2025.
ING expects central bank gold demand to remain strong during the coming year, which will continue to support historically high gold prices.
“Central banks have continued to boost their gold reserves, although the pace of buying slowed in the third quarter, with high prices deterring some buying,” Manthey wrote. “Central banks’ healthy appetite for gold is also driven by concerns from countries about Russian-style sanctions on their foreign assets in wake of decisions made by the US and Europe to freeze Russian assets, as well as shifting strategies on currency reserves.”
She said that while sovereign buying remains strong this year, ING expects the full-year total to fall short of the 2022 and 2023 totals.
“Looking ahead into next year, we expect central banks to remain buyers due to geopolitical tensions and the economic climate,” Manthey said. “A World Gold Council survey conducted in April 2024 found that 29% of central bank respondents intend to increase their gold reserves in the next 12 months.”
ING also expects the recent uptick in ETF inflows to resume and to continue in 2025.
“Global gold ETFs have seen inflows for six months in a row, supported by North America and Asian flows,” she noted. “Investor holdings in gold ETFs generally rise when gold prices gain, and vice versa. However, gold ETF holdings have been in decline for much of 2024, while spot gold prices have hit new highs. ETF flows finally turned positive in May.”
Manthey said that while ETF holdings declined at the beginning of November following the U.S. election, “looking ahead into 2025, we believe inflows should continue as the Federal Reserve continues to cut rates.”
ING’s overall position is that the gold rally has further to run in 2025, and the bank expects prices to average close to this year’s all-time high in Q1-Q2 2025.
“We believe gold’s positive momentum will continue in the short to medium term,” Manthey said. “The macro backdrop will likely remain favourable for the precious metal as interest rates decline and foreign-reserve diversification continues amid geopolitical tensions, creating a perfect storm for gold.”
“In the longer term, Trump’s proposed policies – including tariffs and stricter immigration controls, which are inflationary in nature – will limit interest rate cuts from the Federal Reserve,” she concluded. “A stronger USD and tighter monetary policy could eventually provide some headwinds to gold. However, increased trade friction could add to gold’s haven appeal.”
ING projects the spot gold price will average $2,800 per ounce in Q1 and Q2, before pulling back to $2,750 in Q3 and $2,700 in Q4, for an average price of $2,760 per ounce for 2025.
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