Gold prices keep reversing, will it rise or fall in the future?

According to Mr. Ole Hansen, Head of Commodity Strategy at Saxo Bank, gold prices have increased by 27% since the beginning of the year, reaching the target of 3,300 USD/ounce in 2025, faster than many experts had previously predicted.

An analytical report from Saxo Bank points out many factors driving the continuous increase in gold.

Fed interest rate

Investors are closely watching the Fed’s interest rate policy, with the market expecting the agency to cut interest rates by 75 to 100 basis points before the end of 2025, reflecting a trend of easing monetary policy to support economic growth.

In this context, falling interest rates become a strong support factor for gold. When interest rates are low, the opportunity cost of holding non-yielding assets such as gold decreases, making gold more attractive to investors, thereby supporting gold prices.

Gold ETF Trading

The demand for investment in gold ETFs is on the rise, becoming one of the main drivers of gold prices this year. To date, the total amount of gold held by ETFs has reached 2,773 tons, an increase of 269 tons compared to the same period in May 2024. However, this figure is still significantly lower than the historical peak of 3,453 tons recorded in 2020.

A key factor attracting investors to ETFs is the cost of holding non-yielding assets such as gold. The prospect of lower holding costs, coupled with concerns about an economic downturn, is driving demand for gold.

Gold ETFs will continue to be the main driver of investment demand for the rest of 2025, according to expert George Milling-Stanley.

Inflation rises in the US

Gold has long been considered an effective inflation hedge. When inflationary pressures increase, investors often shift their money to gold to preserve asset value.

Real yields on the US Treasury bond curve have been falling steadily recently, reflecting growing concerns about future inflation.

As inflation expectations rise, real yields (inflation-adjusted interest rates) on fixed-income assets – such as bonds – fall, thereby increasing the relative appeal of gold.

Geopolitical risks

Global instability tends to push investors to seek safe haven assets such as gold. When geopolitical tensions escalate, such as armed conflict, war or diplomatic unrest, the demand for safety in gold often increases, thereby creating a driving force for gold prices.

In addition, trade wars, typically the prolonged trade tensions between the US and China, are increasing risks to global economic growth, thereby further strengthening gold’s role as a “safe haven” for international capital flows.

Central bank needs

More and more central banks around the world are trying to diversify their foreign exchange reserves, reduce their dependence on the US dollar and switch to holding gold as a neutral, long-term stable reserve asset.

Countries like China, India, Türkiye and Russia are leading the way, with global central banks consistently buying more than 1,000 tonnes of gold a year over the past three years – a multi-decade high.

Analysts say that in the context of geopolitical instability and increasing currency risks, the trend of central banks hoarding gold is likely to continue in 2025. This creates a solid support for gold prices in the international market.