After beating most assets in 2024, gold is poised to continue its bullish trajectory. While positive catalysts like central bank purchases and inflation concerns still loom, the market sees President-elect Donald Trump's second term as a major volatility driver.
"Although gold's momentum stalled in November as Donald Trump's win at the polls drove a surge in risk assets and the U.S. dollar, we think its price still has room to run in 2025," noted State Street Global Advisors, an investment management division of the world's fourth largest asset manager.
Among their gold strength catalysts are robust central bank demand, growing consumer investment in Asia, and the fiscal and monetary uncertainty stemming from Trump's anticipated policies. "Gold remains an essential hedge against rising inflation, geopolitical instability, and potential currency devaluations," the firm stated.
Trump's second term, set to begin on Jan. 20, is expected to intensify market volatility. Tariff policies could stoke cost-push inflation, particularly the threat of up to 60% tariffs on Chinese imports. These tariffs would likely pressure the U.S. dollar, making gold an attractive hedge, State Street said.
In contrast, a strong dollar—buoyed by higher interest rates or foreign asset flows—could temper gold's gains (owing to the historical inverse relationship). However, central bank purchases may offset this effect.
Since 2022, central banks have purchased 2,700 tons of gold, the fastest pace in recent history, reflecting a deliberate move to diversify away from dollar-heavy reserves. Emerging markets, in particular, have accelerated de-dollarization efforts as geopolitical tensions rise. For example, India significantly expanded its gold reserves. Cultural significance, increased investment options like ETFs, and favorable tax reforms have bolstered demand.
Drawing historical parallels, State Street sees Trump's policies—marked by tax cuts, increased defense spending, and tariff strategies—as comparable to George W. Bush's tenure, during which gold rallied 221% amid growing federal debt and accommodative monetary policies.
State Street projects three scenarios for gold in 2025:
Base Case (50% Probability): $2,600-$2,900/oz. Robust central bank purchases and steady Asian demand maintain a soft price floor.
Bull Case (30% Probability): $2,900-$3,100/oz. Weaker dollar and Fed rate cuts spur ETF inflows and bolster Asian demand.
Bear Case (20% Probability): $2,200-$2,600/oz. Strong US growth and dollar strength lead to ETF outflows, though central bank buying provides support.
State Street's specialized gold ETF, SPDR Gold Trust (NYSE:GLD), is up 26.04% year-to-date.