Record-breaking Golden Hour 1 results in half a century, yet Future Hour 2 prospects shrouded in doubt
In the first half of 2025, gold has proven to be the top-performing asset, surging over 25% and posting its second-best first half in five decades. The precious metal is expected to maintain strong support in the range of $3,200 to $3,400 per ounce for the second half of the year, according to Malabar Group's Dileep Narayanan.
Several key factors influence this outlook. Geopolitical tensions, such as the ongoing conflicts in the Middle East and the Russia-Ukraine war, continue to persist, supporting gold as a safe-haven asset. Central banks, particularly those in emerging markets, are forecasted to purchase over 900 tonnes of gold in 2025, driving structural momentum in prices.
The ongoing de-dollarization trend also enhances gold's role as a global monetary asset. Central bank demand and physically-backed gold ETFs have surged in early 2025, reflecting increased investor interest tied to this shift.
However, the relationship between gold and long-term interest rates has become more complex. Gold continues to be viewed as a hedge against policy uncertainty rather than solely an alternative to yield-bearing assets. This nuanced relationship will remain key to gold's performance in H2 2025.
If the US Federal Reserve cuts rates in H2 due to economic weakness, gold could gain further momentum and potentially surge past $3,500/oz. On the other hand, if selling pressure continues, gold may enter a correction phase with prices falling to the $2,800-3,000/oz range, still a 7-20% gain year-to-date. In the author's view, the most probable scenario is that gold finds a new equilibrium around $3,300/oz in H2 2025.
US fiscal uncertainty and a slowing economy remain longer-term supports for gold. If gold becomes too expensive relative to a weakening dollar, central banks may reduce or even reverse their purchases, which could impact the market. Nevertheless, the de-dollarisation trend is likely to continue, with gold being seen as a risk diversifier.
In summary, gold is poised to maintain strong support in the $3,200-$3,400 range through the second half of 2025, buoyed by persistent geopolitical risks, continued central bank demand, interest rate complexities, and the ongoing de-dollarization trend. This confluence of factors positions gold primarily as a safe haven and strategic reserve asset in a volatile global economic environment.
- In the volatile global economic environment, businesses and investors alike are closely monitoring the gold market, as it serves as a strategic reserve and safe-haven asset.
- The economy and politics are intertwined with the gold market, as geopolitical tensions, central bank purchases, and the ongoing de-dollarization trend significantly impact gold's finance-related aspects.
- As gold maintains its strong support in the $3,200-$3,400 range, the economy's performance and resulting interest rates will play a crucial role in determining the direction of gold's future investing prospects.
