Money managers are expressing optimism over gold investments as bullish trends reshape the financial market heading toward 2025. Following a remarkable performance during 2024, where the precious metal saw its most significant gain since 2010, bullion prices soared 27%, reaching record highs close to $2,800 per ounce. This impressive rally has been driven by three primary factors: substantial purchases by central banks, particularly from China and other developing economies, the Federal Reserve’s monetary easing policies, and gold’s traditional role as a safe haven amid rising geopolitical tensions, including conflicts in Ukraine and the Middle East.
These factors remain intact as we enter 2025, but many investors are wary of the potential impacts of Donald Trump's second term on trade dynamics, inflation, and the broader global economy. This uncertainty is prompting continued purchases of gold as a protective measure against possible economic shocks. "Investment diversification through bullion purchases is a trend likely to persist," commented Greg Sharenow, portfolio manager at Pacific Investment Management Co.
Some hedge funds are heavily leaning on gold, with Quantix Commodities allocating 30% of its holdings to the metal, nearly double what it typically reflects within the Bloomberg Commodity Index. Senior executive Matt Schwab of Quantix expressed confidence, stating they plan to maintain their sizable investment through 2025, expecting gold prices to escalate to $3,000.
Wall Street's top financial institutions echo this sentiment, with Bank of America Corp. and JPMorgan Chase & Co. predicting gold to reach $3,000 by the end of the year. Meanwhile, UBS Group AG's forecast is set at $2,900. Although Goldman Sachs adjusted its expectations, it still anticipates gold will hit $3,000 by mid-2026.
Despite the bullish forecasts, gold prices saw some downturn following the November 5 U.S. election results, losing traction against soaring dollar values and upbeat stock and cryptocurrency markets, with spot gold trading around $2,643 per ounce recently. Nevertheless, analysts remain optimistic about gold’s long-term outlook. Concerns about potential new tariffs under Trump’s administration loom, with fears of inflation potentially complicative for the Federal Reserve's plans for interest rate adjustments this year.
Darwei Kung, head of commodities at DWS Group, remarked, "Should trade relations deteriorate with new policies, we may see the equity market react negatively. Gold would be a beneficial asset to hold to hedge against such risks." His outlook aligns with views from others who see potential trade wars with the U.S. leading central banks to increase easing measures—a scenario likely to boost gold’s appeal and performance.
Patrick Fruzzetti, portfolio manager at Rose Advisors, pointed out significant differences now compared to the last time Trump was president, chiefly the alarming rise of U.S. deficit spending. Currently, the national debt stands at about $28 trillion, compared to less than $17 trillion at the end of 2019, with the Congressional Budget Office projecting federal deficits to exceed 6% of GDP by 2025.
Fruzzetti raised questions about the government’s ability to manage this debt, which could deter some from investing heavily in Treasuries. He stated, "Actions speak louder than words" about the incoming administration’s commitment to curbing the federal deficit, asserting, "Until they can show me different, I am not downsizing my gold position." His sentiments find common ground among investors who continue to perceive gold as both a safeguard against economic volatility and geopolitical instability.
Looking forward, various analysts, including Aline Carnizelo, managing partner at Swiss firm Frontier Commodities, leaned toward more optimistic expectations, projecting gold prices to trade above $2,800 this year as central banks respond to financial pressures. This overall bullish narrative surrounding gold effectively highlights its dual role as both investment diversification and protection against uncertainties, capturing the interest of private and institutional investors alike as we head toward what could be another turbulent economic year.