When will gold in 2025 fall? Investors must know the logic behind the rise and fall

Since entering 2025, the gold market has remained hot, but a question has been troubling many investors: Why did gold prices pull back after breaking through the 4,400 USD historical high? When will gold fall? To answer this question, one must first understand the core logic driving gold price fluctuations.

Why Has Gold Recently Risen Significantly? Analyzing the Three Main Drivers

Driver 1: Rising Policy Uncertainty

A series of tariff policies introduced after Trump took office directly triggered the 2025 gold rally. Consecutive trade policy adjustments led to a noticeable increase in market risk aversion, pushing up gold prices. Historical experience (such as the US-China trade war in 2018) shows that during periods of policy uncertainty, gold prices typically see short-term gains of 5-10%. When the market is full of variables, the appeal of gold as a safe-haven asset naturally increases.

Driver 2: Expectations of Falling Real Interest Rates

According to CME interest rate tools, there is an 84.7% probability that the Federal Reserve will cut interest rates by 25 basis points at the December meeting. The Fed’s rate cuts will lead to a weaker dollar, reducing the opportunity cost of holding gold, thereby increasing its attractiveness. Historical data shows a clear negative correlation between gold prices and real interest rates: Rate decrease → Gold rise.

Real interest rate equals nominal interest rate minus inflation rate. Changes in Fed policy greatly influence nominal interest rates, which in turn affect real interest rates. This also explains why gold price fluctuations almost closely follow changes in Fed rate cut expectations.

Driver 3: Continued Central Bank Accumulation

According to the World Gold Council, in Q3 2024, global central banks net purchased 220 tons of gold, a 28% increase quarter-over-quarter. In the first nine months of the year, central banks accumulated about 634 tons of gold. More importantly, 76% of surveyed central banks believe that the proportion of gold in their reserves will be moderately or significantly increased over the next five years, while they expect the dollar reserve ratio to decline. This move by central banks reflects recognition of gold’s long-term value and provides solid support for gold prices.

Other Factors Supporting Gold’s Rise

Global High Debt Environment

By 2025, global debt totals $307 trillion. High debt levels mean limited flexibility in interest rate policies, likely leading to more accommodative monetary policies, which can lower real interest rates and indirectly boost gold’s attractiveness.

Decline in Dollar Confidence

When the dollar weakens or market confidence in the dollar drops, gold priced in USD benefits and tends to attract more capital inflows.

Geopolitical Risks

Ongoing conflicts like Russia-Ukraine and escalating tensions in the Middle East increase market demand for safe assets, which can cause short-term volatility in gold prices.

Media and Social Media Effects

Continuous news coverage and social media hype can lead to a surge of short-term capital into gold markets, further pushing up prices.

When Will Gold Fall? Key Trigger Point Analysis

After understanding the upward logic, the reverse question—when will gold fall—becomes clearer. The following situations may trigger a correction or decline in gold:

Fed Policy Shift

If the Fed stops cutting rates or unexpectedly hikes, real interest rates will rise, significantly reducing gold’s appeal. Especially when rate cut expectations are fully priced in, any unexpected policy change can cause a rapid pullback.

Strong Rebound of the US Dollar

If the dollar index strengthens again or market confidence in the dollar is restored, gold priced in USD will face downward pressure.

Easing Geopolitical Risks

When global tensions ease and risk aversion diminishes, the premium for safe-haven assets like gold will gradually dissipate, leading to price adjustments.

Profit-taking in the Short Term

During high levels, media enthusiasm wanes, and social sentiment shifts, short-term investors may take profits and exit, causing phased declines.

Better-than-expected Global Economic Data

If US employment, inflation, or economic growth data significantly surpass expectations, markets may reassess the need for rate cuts, leading to higher real interest rates and pressure on gold.

How Do Professional Institutions View Gold’s Outlook?

Despite recent volatility, most top financial institutions remain optimistic about gold’s medium- and long-term trend.

J.P. Morgan’s commodities team considers recent corrections as a “healthy adjustment,” raising their Q4 2026 target price to $5,055 per ounce.

Goldman Sachs maintains a target of $4,900 per ounce by the end of 2026, remaining optimistic about gold’s prospects.

Bank of America is more aggressive, previously raising their 2026 target to $5,000, and recent strategists suggest gold could even challenge $6,000 next year.

These forecasts reflect that, supported by long-term factors such as falling interest rates, central bank accumulation, and risk aversion, gold still has room for upward movement in the medium to long term.

Gold Investment Recommendations: How to Respond to Price Fluctuations?

For Short-term Traders

Gold’s high volatility offers opportunities for short-term trading. Liquidity is ample, and trend directions are relatively easier to judge, especially during sharp rises or falls. However, beginners should be cautious, start with small capital, and avoid blindly increasing positions. Learn to track US economic calendars and seize volatility around key data releases.

For Long-term Holders

If purchasing physical gold as part of asset allocation, be prepared to endure significant fluctuations. Gold’s annual volatility averages 19.4%, compared to 14.7% for the S&P 500. Its volatility is not lower than stocks, so ensure your risk tolerance is suitable before buying.

For Portfolio Allocators

Gold can serve as a hedge within a diversified portfolio, but do not allocate all funds to it. Diversification remains more stable. Also, note that physical gold has higher transaction costs, typically between 5%-20%.

Advanced Strategies

Experienced investors may try a combination of “long-term holding + short-term trading.” Under a bullish long-term outlook, leverage price volatility—especially around US market data releases—for short-term trades, but with solid risk control.

Summary: Mastering the Logic of Gold Price Movements Is Key

The continuous rise of gold fundamentally stems from three main supports: policy uncertainty, rate cut expectations, and central bank accumulation. When these factors reverse, gold may decline. In the short term, Fed policies, dollar trends, and geopolitical situations are critical points to watch.

In the medium to long term, gold remains a trusted global reserve asset, and its basic supporting factors have not changed. However, in actual trading, be vigilant about short-term risks, especially around US economic data releases and central bank meetings. Whether pursuing short-term gains or long-term preservation, understanding the logic behind price movements, managing risk exposure, and avoiding herd mentality are the keys to prudent investing.