The investment logic of gold in 2025: The upward trend is not over, opportunities and risks coexist

As we enter the fourth quarter of 2024, the international spot gold XAUUSD market has sparked a strong surge. Data shows that gold’s cumulative increase over the past two years has approached the highest levels in nearly 30 years, compared to the 31% rise in 2007 and 29% in 2010, highlighting the current market’s hotness. Although a technical correction occurred in mid-October after approaching a historical high of around $4,400 per ounce, this has not dampened market expectations for further rise.

Three Drivers Behind the Gold Surge

To understand why gold will experience such a trend in 2025, it is essential to analyze the core factors driving the gold price increase.

First is the surge in safe-haven demand due to global uncertainty. Since early 2025, a new round of tariff policies and trade frictions have triggered concerns about economic prospects. Historically, during periods of policy uncertainty (such as during the US-China trade war in mid-2018), gold prices typically rose by 5–10% in the short term. When market sentiment leans toward risk aversion, demand for safe assets increases, and gold’s status as a traditional safe haven remains unshaken.

Second is the deep impact of Federal Reserve monetary policy expectations. The Fed’s rate cut decisions directly relate to changes in real interest rates — a key indicator of gold price movements. Data shows that gold prices have a clear negative correlation with real interest rates: when nominal rates decline and inflation remains stable, real interest rates fall, making gold more attractive. Currently, the probability of a 25 bps rate cut at the December Fed meeting has reached 84.7% (based on CME interest rate tools), and each revision of this expectation will be reflected in the gold price.

Third is the ongoing accumulation by global central banks. The World Gold Council’s latest data shows that in Q3 2025, net gold purchases by central banks reached 220 tons, a 28% increase quarter-over-quarter; the total for the first nine months is about 634 tons. More importantly, in the WGC’s survey, 76% of respondent central banks indicated they plan to increase gold reserves over the next five years, while most expect the dollar reserve ratio to decline. This structural shift in reserve allocation provides long-term demand support for gold.

Other Factors Behind the Market

Besides the main drivers above, the continued strength of gold is also closely related to multiple macroeconomic factors.

High global debt levels limit policy space. As of now, global debt has reached $307 trillion, meaning high debt environments put enormous pressure on central banks to either raise interest rates or tighten monetary policy. Under these constraints, easing monetary policy has become an inevitable choice, which tends to lower real interest rates and thus boost gold’s relative value.

Confidence in the US dollar is wavering, also pushing gold prices higher. When the US dollar index weakens or trust in the dollar declines, gold assets priced in dollars become more attractive, prompting reallocation of funds.

Geopolitical risks also provide short-term trading opportunities for gold. Prolonged Russia-Ukraine tensions, conflicts in the Middle East, and various sudden events can temporarily boost demand for safe assets.

Institutional Forecasts and Future Outlook

Current market outlooks for gold’s long-term prospects remain unchanged despite short-term corrections.

J.P. Morgan’s commodities research team describes the recent adjustment as a “healthy technical pullback,” and has raised its Q4 2026 gold target price to $5,055 per ounce.

Goldman Sachs analysts continue to maintain an optimistic stance, reaffirming their expectation that gold will reach $4,900 per ounce by the end of 2026.

Bank of America’s strategy division is more aggressive, raising its 2026 target to $5,000 per ounce, and recently suggested that gold could reach $6,000 per ounce next year.

Signals from the retail market also support this view: mainstream jewelry retailers such as Chow Tai Fook, Luk Fook Jewelry, Chow Sang Sang, and Chow Tai Seng still quote their pure gold jewelry prices above RMB 1,100 per gram, with no significant correction observed.

Entry Timing and Strategies for Retail Investors

For different types of investors, the current gold market offers diversified opportunities but also involves corresponding risks.

If you are an experienced trader, volatile markets are ideal for leveraging technical analysis. In a liquid gold market, the forces of bulls and bears during sharp surges and drops are often clear, and capturing these short-term fluctuations can generate many trading opportunities. Tracking US economic data releases through economic calendars, especially during periods of market volatility around key data, can significantly improve short-term success rates.

If you are a novice just entering the market, be sure to follow the principle of “small-scale testing.” Gold’s average annual volatility is as high as 19.4%, far exceeding the S&P 500’s average of 14.7%. Chasing highs or blindly increasing positions can easily lead to psychological stress and capital loss. It is recommended to start with small funds to familiarize yourself with market operations and gradually accumulate experience.

For long-term holders of physical gold, entering now requires mental preparation for potential sharp fluctuations. Although the medium- and long-term trend supports gold’s strength, its cycle is very long — it could double in ten years or drop 50% at some stage. Additionally, transaction costs for physical gold (generally between 5%–20%) should not be overlooked and should be included in return calculations.

If you want to allocate gold in your portfolio, the key is to control the allocation ratio. Putting all your funds into gold is unwise; a diversified investment strategy can better balance risk and return.

For investors seeking maximum returns, a “long-term holding + swing trading” combined strategy can be considered. Maintaining a core position while using price fluctuations for short-term trades, especially around US market key data releases, can amplify volatility and create additional trading opportunities. However, this approach requires investors to have certain market experience and risk management skills.

Final Reminder

The volatility features shown in gold’s trend chart remind investors that before entering this market, they must fully understand three points: gold’s annual volatility is comparable to stocks; gold investment is a long-term game that often requires a time span of ten years or more to see true returns; and physical gold involves considerable transaction costs.

In the 2025 gold market, opportunities and risks go hand in hand. Well-prepared investors with clear strategies will be able to profit, while those rushing in or blindly following trends may suffer significant losses. Regardless of the approach, rational thinking should always come first.