(Kitco News) - The gold market experienced historic moments in 2024 as prices rallied to record highs. According to one market strategist, 2025 could be just as eventful as the world grapples with significant geopolitical and economic uncertainty.
Some highlights of 2024 include unprecedented demand from Asian consumers, which helped drive prices to record levels early in the year. Central banks also purchased gold at a record pace during the first half of the year.
Another major milestone this year was the price of a 14-kilogram London Bullion Market Association good-delivery gold bar surpassing $1 million.
In an interview with Kitco News, George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, said he expects 2025 to be another exciting and potentially record-setting year for gold.
With the gold market maintaining solid support above $2,600, prices are up more than 25% for the year. At their peak in late November, gold prices had risen over 30%, marking their best gains since 1979.
Milling-Stanley, who has been involved in the gold market for more than 50 years, recalled covering then-President Richard Nixon’s decision to close the gold window, which took the U.S. dollar off the gold standard. He also witnessed the launch of the first gold-backed exchange-traded fund, SPDR Gold Shares (NYSE: GLD), 20 years ago.
“In the last 50 years, I have never been bored watching the gold market, and I don’t expect to be bored this year either,” he said.
Milling-Stanley’s team at State Street has published their official price forecast for 2025. The investment firm sees a 50% chance of gold prices trading between $2,600 and $2,900 an ounce, while analysts assign a 30% probability to prices trading between $2,900 and $3,100 an ounce.
On the downside, State Street estimates a 20% chance of gold prices falling to between $2,200 and $2,600 an ounce.
“What that means is that we are 80% confident that gold will stay where it is or go even higher in 2025,” he said.
One notable aspect of State Street’s forecast is the broader range of expected price action. Milling-Stanley explained that the wider range reflects heightened financial market uncertainty.
He noted that while gold prices are expected to trend higher in 2025, investors should prepare for elevated volatility.
While many analysts believe the Federal Reserve’s monetary policy poses the greatest risk to the gold market, Milling-Stanley described it as a sideshow in the broader landscape.
Gold has been consolidating for the past two months as investor expectations surrounding the Federal Reserve’s monetary policy have shifted. Last week, during the U.S. central bank’s final monetary policy meeting of the year, committee members signaled plans for only two rate cuts in 2025. This contrasts with their September forecast, which anticipated four rate cuts.
Milling-Stanley said that while a slower easing cycle may support the U.S. dollar, gold has proven to be a much broader global financial asset over the past year. He noted that a hawkish Fed stance at the start of 2024 did not prevent gold prices from reaching record highs, and he does not expect it to impede further gains in 2025.
“I’m not expecting the Fed’s monetary policy to create any sustained weakness in gold in 2025,” he said.
He added that if the Fed is forced to adopt a more hawkish stance next year, it will likely be due to rising inflation, which would be positive for gold.
“Whatever the Federal Reserve does next year, there is a sound economic case for holding some gold in your portfolio,” he said.
As for the biggest driver of gold, Milling-Stanley expects central bank demand to remain a dominant force in the marketplace.
“Central banks, primarily in emerging markets, have absorbed more than 15% of total end-user demand, and that trend could continue for the next 14 years,” he said.
At the same time, Milling-Stanley anticipates robust Asian demand through 2025 as consumers seek to protect themselves from economic uncertainty and geopolitical instability.
“The Chinese economy is struggling, so the average Chinese investor is running scared from the local stock market. What does he do? He turns to the traditional investment, which, for thousands of years, has been gold,” he said. “But it’s not just the Chinese who are buying. We are seeing a significant revival in emerging market demand, led by India and China, with additional buying in Vietnam, Korea, and Thailand.”
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