Gold welcomes a "good start" in 2025! Wall Street anticipates gold prices soaring to $3,000 in 2025

According to the Zhitong Finance APP, gold prices have just recorded the largest annual increase since 2010, and amidst the global stock market experiencing a "black opening" at the beginning of 2025, it welcomes a "red opening." Financial giants on Wall Street, such as Goldman Sachs, Bank of America, and JP Morgan, generally predict that the soaring gold prices in 2024 will further rise in 2025, with a strong possibility of approaching the historical peak of $3,000.

The Federal Reserve's shift towards a more accommodative monetary policy, record purchases by global central banks, the unprecedented scale of U.S. debt triggering a significant reduction in global confidence in U.S. Treasury bond repayments, and the ongoing geopolitical tensions have been the core drivers behind the largest increase in gold prices since 2010 over the past year. Looking ahead to 2025, while the first core factor faces uncertainty due to the Federal Reserve's shift to a "hawkish" stance in December 2024, other core factors will continue to support gold in reaching new historical highs in 2025, especially as the global central bank gold rush and safe-haven demand are expected to resonate continuously.

After the Federal Reserve's stance turned hawkish due to significant inflation risks and overall health in the labor market, the "higher for longer" narrative (i.e., "the Federal Reserve will maintain high interest rates for a longer period") has returned to the forefront, prompting the market to begin pricing in the possibility of no interest rate cuts in 2025 and a continued upward expectation for neutral interest rates. This significantly weakened the investment attractiveness of gold, a non-yielding asset, in November and December 2024, which is also the biggest uncertainty gold will face in 2025.

Major Wall Street financial institutions, including JP Morgan and Citigroup, expect that the global central bank's demand for gold purchases, along with global concerns about U.S. inflation and reckless U.S. fiscal spending leading to a repayment crisis for U.S. Treasury bonds, will continue to drive gold prices up next year. A survey by the World Gold Council supports the market expectation that central banks will continue to purchase gold, which may continue to strongly support demand and maintain the upward trend in gold prices.

Both Goldman Sachs and Bank of America expect that next year, gold prices will rise by 13% based on the strong increase in 2024, reaching $3,000 per ounce, although this is still less than half of this year's record strong increase. The average expectation among the top ten financial institutions on Wall Street is that gold prices will rise by 8% in 2025, reaching $2,860.

Compared to the stock market's "black opening," gold welcomes a "red opening," a good omen

After gold prices recorded the largest annual increase in 14 years, gold has had a very smooth start in 2025. In contrast to the unexpected "black opening" of the global stock market in 2025, gold's performance at the beginning of 2025 is much better. On Thursday, gold futures prices rose over 1%, hovering above $2,670 per ounce, the highest trading level since mid-December, while spot gold prices rose to around $2,660 per ounce, highlighting investors' optimism about the Federal Reserve potentially cutting interest rates at least two more times in 2025 and their positive outlook on global central banks continuing to invest heavily in gold purchases in 2025

Despite the market beginning to price in the likelihood that U.S. inflation levels will resurge due to the "tariffs on foreign goods + tax cuts domestically" MAGA policy framework after Donald Trump won the U.S. presidential election in November, the rise in precious metals has essentially stalled. However, gold prices still closed the year with an annual increase of over 27%, even surpassing the benchmark U.S. stock index—the S&P 500 index, which had an annual increase of over 23% in 2024.

MAGA, short for "Make America Great Again," can refer to the core tone of all policies led by the Trump administration and is also used by some mainstream media to refer to Trump himself and the fervent supporters of Trump in the United States. Trump, known as "the king of understanding," is set to return to the White House in January, and the MAGA wave will once again sweep across America.

The JP Morgan analyst team wrote in a report at the beginning of 2025: "We maintain a strong bullish outlook on gold for three consecutive years." They added, "In the early days of the Trump administration in 2025, gold will still be seen as a good investment tool to hedge against the high uncertainty of the global macro environment."

The Bank of America precious metals team stated that due to the uncertainty facing the global economy from a series of radical trade policies that may arise from Trump's return, as well as the safe-haven demand brought about by global geopolitical turmoil, gold and silver will receive more solid support in the new year, emphasizing that gold is "the best hedge against the acceleration of U.S. inflation in 2025."

In 2025, gold aims for the epic milestone of $3,000

JP Morgan predicts in its report that this year, gold prices will rise to the epic milestone of $3,000 per ounce. Analysts at Goldman Sachs also predict that due to the ongoing trend of major global central banks purchasing gold, which is far from over, gold prices are expected to reach $3,000 by the end of 2025. "Our surveys and historical data indicate that central banks in emerging market countries are buying gold to hedge against financial uncertainty and geopolitical shocks," Goldman Sachs analysts wrote.

Goldman Sachs analysts also expect that if the scale of gold purchases by major global central banks exceeds market expectations, gold prices could rise to $3,050. The institution also stated that if the Federal Reserve decides to cut interest rates only once this year, gold prices may stagnate around $2,900. However, the $2,900 expectation provided by Goldman Sachs is still above the average expectations on Wall Street.

"When Trump's trade tariff measures—which are a key factor in our forecast for a stronger dollar in 2025, or broader geopolitical shocks driving a stronger dollar—are in play, the dollar and gold prices may experience a rare simultaneous rise." "The rising uncertainty of geopolitical and stock market risks may be very favorable for these two asset classes, which are seen as the primary safe-haven assets globally," the Goldman Sachs analysis team wrote in the report Recently, the inflation rate has remained high and sticky, raising doubts among investors about whether the Federal Reserve can quickly lower borrowing costs. Some economists believe that certain policies proposed by the Trump administration, such as increasing tariffs, may accelerate the pace of price increases while prompting the Federal Reserve to maintain high interest rates for an extended period, i.e., "higher for longer."

If the Federal Reserve cuts interest rates at least twice more, some market observers expect that retail investors may exit their wait-and-see stance on gold, as they aim to preserve wealth value and hedge portfolio risks.

Steven Feldman, co-founder and CEO of the physical precious metals platform GBI, stated in an interview: "In 2024, retail investors in the U.S. are not really participating in the gold bull market." He added, "If the Federal Reserve's benchmark interest rate declines slightly, or if stagflation sentiment rises, then I believe the inflow of funds from the large retail investor base in the U.S. should be very optimistic, which will provide strong support."

Additionally, investors are concerned that the U.S. Treasury, which has heavily issued bonds in recent years and faces an increasingly large budget deficit, may struggle to repay the rising interest on its debt. This has led to higher pricing for long-term U.S. Treasury yields, and the resulting risk-averse sentiment in financial markets will be a core catalyst for gold prices reaching the $3,000 mark.

The massive short-term Treasury bonds have significantly increased the size of U.S. Treasury debt to $36 trillion in just a few years, which has also led to soaring budget deficits and record-high interest payments on U.S. debt. Data compiled by institutions indicate that nearly $3 trillion of U.S. Treasury bonds will mature in 2025, most of which are short-term bonds. The U.S. Treasury has been issuing a large amount of such bonds in recent years, as they are highly liquid and therefore quite popular.

However, this also means that the Trump 2.0 era will not only need to issue bonds to cope with domestic tax cuts and defense and livelihood spending under "de-globalization," but also face the need to repay a larger scale of U.S. debt interest. These factors are the core logic behind the recent significant increase in the volatility center of the 10-year U.S. Treasury yield among market investors, and they will also be the core logic for risk-averse funds collectively flowing into gold. Some economists believe that the debt and budget deficit in the Trump 2.0 era will be much higher than official forecasts, thus the pressure on U.S. debt repayment may further escalate, making gold the most core asset class for hedging U.S. debt credit risk