(Kitco News) - Gold has room to move higher in the near term; however, the market is running out of momentum as prices hold above $3,000 an ounce, according to one research firm.
On Thursday, spot gold prices managed to hit a new intraday all-time high at $3,057.95 an ounce, but the market has seen consistent profit-taking into the weekend. In their latest research note, analysts at Metals Focus said that gold remains an attractive safe-haven asset as President Donald Trump continues to push forward with his America First policies and global import tariffs on April 2.
However, the analysts also noted that at some point, geopolitical tensions and economic uncertainty will level out, and demand for safe-haven assets will start to diminish.
“There is a risk of a further escalation of the trade wars between the US and its key trading partners, which will raise recession fears. With already weak sentiment, a further correction in global stock markets, for US equities in particular, cannot be ruled out. Against this backdrop, investment inflows into gold are likely to continue among institutional investors seeking portfolio diversifications in the coming weeks,” the analysts said. “That said, as we progress into the latter part of 2025, the investment case for gold will become less attractive. This is largely premised on assumptions that the financial markets will get more clarity on tariffs. Our Base Case also assumes that the US economy will avoid a recession this year. Once investment inflows into gold slow, this should start to create downward pressure for the gold price.”
While the U.K.-based research firm sees gold prices peaking in the first half of the year, it does not expect to see significant weakness afterward as the market remains well-supported.
“Trump Administration’s fast-changing policies will see financial market volatility remain high. Strong purchases by the official sector are also projected to persist in the foreseeable future. All these should keep gold prices elevated throughout this year,” the analysts said.
Metals Focus said that gold could also find further support from the Federal Reserve even as the central bank reiterated its relatively neutral monetary policy stance Wednesday.
In its updated economic projections, the U.S. central bank continued to signal two rate cuts this year. At the same time, it lowered this year’s growth forecast to 1.7%, down from December’s forecast of 2.1%. The committee also raised its inflation expectations to 2.8%, up from the previous projection of 2.5%.
“Even though the Fed’s latest projection (of 50bp cuts in 2025) are more hawkish than current market expectations, the fact that rates are still coming down will underpin prices. With a pick-up in inflation expectations amid tariff fears, this should drive a larger decline in real rates, reducing the opportunity cost for holding gold,” the analysts said.
Metals Focus is currently maintaining its initial 2025 gold price forecast. They see the precious metal trading in a range between $2,300 and $3,000 an ounce, with prices to average this year around $2,600 an ounce.
Although Metals Focus does not expect the U.S. economy to fall into a recession, the Atlanta Federal Reserve’s GDP tracker continues to show the economy contracting by 1.8% in the first quarter of this year.
