Gold’s rally continues to break records, with spot gold reaching a new high of $3,249 per ounce on April 1, 2025, spurring analysts to revise their price forecasts upwards. The surge in gold prices is being driven by multiple factors, including escalating trade uncertainties, geopolitical tensions, a weaker US dollar, and increased central bank purchases, all compounded by rising recession risks.
Revised Price Forecasts
Fitch Solutions has raised its 2025 average price forecast to $3,100 per ounce, up from $2,500 per ounce. The firm expects gold prices to fluctuate between $3,000 and $3,400 per ounce in the second and third quarters of 2025.
State Street Global Advisors has also increased its gold outlook, revising its base-case scenario for the year to a range of $2,800 to $3,100 per ounce, up by $200 from its previous forecast. The updated forecast takes into account robust ETF flows and the ongoing rally in gold prices.
Drivers of Gold’s Rally
Several factors are supporting gold’s continued rise:
Trade and Geopolitical Tensions: Uncertainty surrounding global trade policies, particularly the U.S. tariffs, and geopolitical risks are bolstering demand for gold as a safe-haven asset.
Central Bank Purchases: Increasing central bank demand is playing a significant role in supporting gold prices. Central banks continue to buy gold as a hedge against economic instability.
Recession Fears: The growing risk of a recession, combined with potential interest rate cuts by the U.S. Federal Reserve, is further strengthening gold’s appeal.
Weak U.S. Dollar: A weaker dollar typically supports gold prices, as gold becomes more affordable for holders of other currencies.
Potential for Further Gains
Despite the bullish outlook, analysts warn that the path forward for gold may not be linear. In a bull case scenario where equity markets face further drawdowns, U.S. recession fears intensify, geopolitical tensions rise, and demand from China rebounds, gold could potentially reach $3,300 to $3,400 per ounce in the next six to nine months. However, analysts anticipate periods of consolidation or drawdowns (5-7%) during this rally.
State Street Global Advisors points out that while the rally is expected to continue, gold prices could experience profit-taking or liquidation in the second or third quarter of 2025, causing temporary price dips. These fluctuations are typical in strong bull markets.
China’s Impact on Gold Prices
China, a major player in global gold demand, could influence the trajectory of gold prices:
Retail Demand: The first quarter of 2025 saw weak retail demand in China, particularly during the Chinese New Year period, with imports dropping significantly. 16.5 tonnes of gold were purchased in January, the weakest seasonal performance in four years.
However, there was a rebound in February 2025, with 76.3 tonnes imported, although this was still down 45% compared to the same period the previous year.
Analysts are uncertain whether the early-year dip in demand is temporary or signals a downturn in China’s gold consumption.
The future of China’s retail gold demand is critical to gold’s performance. The Chinese government’s pilot program, which allows insurers to invest in gold, could support demand, and any rebound in imports could bolster the bull case outlook for gold, pushing prices toward $3,400 per ounce.
Conclusion
Gold prices have seen a dramatic surge, reaching new record highs due to various global uncertainties. Analysts are optimistic about further gains, with revised price forecasts indicating potential highs of $3,300 to $3,400 per ounce over the next few months. However, periods of consolidation or short-term pullbacks are expected as part of the typical cycle in a bull market.
Gold’s future performance will be shaped by factors such as central bank activity, recession risks, geopolitical tensions, and especially China’s demand. Investors should watch closely for any signs of further geopolitical instability, changes in central bank policies, or shifts in China’s gold consumption, as these will play a pivotal role in determining the next phase of gold’s price movement.
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