Will the 2025 gold rally continue? Market insights investors must watch

Entering 2025, the international gold market remains volatile. After reaching a historic high of $4,400 per ounce in October last year, gold prices have pulled back, but discussions about the rally remain heated. Does this wave still have room to rise? How should investors respond?

The Core Drivers Behind the Gold Rally

The rise in gold prices is not accidental. Over the past two years, gold has repeatedly hit new highs, with the gains from 2024 to 2025 approaching the highest levels in 30 years, surpassing 31% in 2007 and 29% in 2010. Three main factors support this gold rally:

Policy Uncertainty Sparks Safe-Haven Buying

Frequent tariff measures under the new policy environment have significantly increased market risk aversion, prompting investors to flood into the gold market. Based on historical experience (such as during the 2018 trade tensions), periods of heightened policy risk typically see gold prices rise by 5% to 10% in the short term.

Weakening US Dollar and Rate Cut Expectations Interact

The Federal Reserve’s rate cut policies directly influence real interest rates. When real interest rates (nominal rate minus inflation) decline, the cost of gold priced in dollars decreases, making it more attractive for investment. According to CME interest rate futures, the probability of a 25 basis point rate cut in December is 84.7%. Market expectations about the pace of rate cuts almost entirely determine short-term gold price movements.

Global Central Bank Reserves Increase Reinforces Demand

Data from the World Gold Council shows that in Q3 2025, global central banks net purchased 220 tons of gold, a 28% increase from the previous quarter. In the first nine months, central banks accumulated about 634 tons of gold, far exceeding previous years’ levels. In a survey by the same organization, 76% of respondent central banks indicated they plan to increase gold reserves over the next five years, while expecting the proportion of US dollar reserves to decline.

Other Key Factors Driving the Gold Rally

In addition to the direct drivers above, several long-term factors also support the gold market:

The global debt has reached $307 trillion, and high debt levels limit the flexibility of monetary policies worldwide, with easing tendencies strengthening and real interest rates being pushed lower. Geopolitical risks (such as the Russia-Ukraine war and Middle East tensions) continue to boost safe-haven assets. Confidence in the US dollar is wavering internationally, benefiting dollar-denominated gold. Media and social discourse further fuel short-term capital inflows, creating a continuous upward trend.

It’s important to note that these factors may cause sharp short-term fluctuations but do not necessarily indicate a guaranteed long-term trend continuation.

Institutional Outlook on the Future of the Gold Rally

Despite recent volatility, many international investment banks remain optimistic about gold’s medium- to long-term prospects:

JPMorgan’s commodities team considers the recent pullback a “healthy correction,” raising their Q4 2026 target price to $5,055 per ounce. Goldman Sachs maintains a target of $4,900 by the end of 2026. Bank of America raises their 2026 gold target to $5,000 per ounce, with strategists hinting that gold could break through $6,000 next year. Major domestic jewelry brands (Chow Tai Fook, Luk Fook, Chao Hong Ji, Chow Sang Sang, etc.) still list their pure gold jewelry prices above NT$1,100 per gram, with no significant correction observed.

As a reserve asset backed by global credit, the long-term support factors for gold remain unchanged.

Retail Investors’ Participation Strategies

After understanding the logic behind the gold rally, investors can judge future trends accordingly. The current rally is not over; both medium- and short-term trading opportunities exist, but the key is to avoid blindly following the trend.

For experienced short-term traders, the volatility provides abundant trading opportunities. Liquidity is ample, and the logic behind price movements is relatively clear, especially during sharp fluctuations, where bullish and bearish forces are easily discerned. Skilled traders can profit from these movements.

For novice investors wanting to capitalize on recent volatility, it’s advisable to start with small positions and avoid over-leveraging. Using economic calendars to track US economic data can effectively assist trading decisions.

Purchasing physical gold for long-term allocation requires mental preparedness for high volatility. Gold’s annual volatility averages 19.4%, higher than the S&P 500’s 14.7%. Transaction costs for physical gold are relatively high (generally 5%-20%), so over-concentration should be avoided.

For more advanced strategies combining short- and long-term approaches, traders can leverage short-term opportunities around US market data releases on top of their existing holdings, but this requires sufficient experience and risk management skills.

Overall, the sustainability of the gold rally depends on whether the above factors persist. Investors should tailor their allocation strategies based on their risk tolerance and investment horizon, avoiding over-concentrating assets in a single asset class.