top of page

Gold Surges 30% YTD: Geopolitical Tensions and Central Bank Demand Drive Prices Higher

Gold has increased its gains this year to over 30%, maintaining its title as the best-performing asset. In the final stretch, rising tensions in the Middle East and uncertainty surrounding the upcoming U.S. presidential elections have fueled demand for gold, while forecasts for next year's gold prices are rising. 


August and September were dominated by growing concerns of a U.S. economic recession, accompanied by increasing expectations of rate cuts from the Federal Reserve. The Fed’s unexpectedly large half-point rate cut sparked expectations of aggressive policy easing, providing tailwinds for gold. 


However, the release of September’s employment figures dampened these expectations, leading to a drop in gold prices. Markets now predict that the Fed will lower rates at a slower pace. However, sustained gold demand drives its price to new all-time highs. 


Gold is seen as a safe haven for risk-averse investors during times of uncertainty. While the decline in retail demand from China has caused some loss of momentum, geopolitical developments and the uncertainty surrounding the U.S. elections continue to enhance gold’s appeal. 


On the other hand, even though expectations for aggressive rate cuts from the Fed have reversed, projections of continued rate reductions, the initiation of rate-cut cycles by other major central banks, and the ongoing robust purchases by central banks justify forecasts of higher gold prices in the coming year. 


At last week’s London Bullion Market Association event, a survey involving traders, refiners, and mines revealed a forecast of gold prices reaching $2,917 per ounce over the next 12 months. Additionally, major investment banks are revising their gold price predictions upwards. 


Goldman Sachs raised its 2025 gold price forecast from $2,700 to $2,900. The revision was attributed to two main reasons: the expectation that major central banks, including China, will continue with rate cuts throughout the year, and the sustained gold purchases by emerging market central banks. Furthermore, increased inflows into physically-backed gold ETFs also support this outlook. 

 


Global Gold ETF Demand Rises as North America Leads Inflows 


Gold-backed ETFs make up a significant portion of the gold market. Therefore, flows into these ETFs highlight expectations for gold and measure the market’s willingness to hold the precious metal. 


According to data from the World Gold Council (WGC), global gold ETFs recorded their fifth consecutive monthly inflow in September. North America led the way in terms of inflows, while Europe was the only region to experience net outflows, though these outflows were modest. 



Asian funds extended their inflow streak to 19 months despite the recent slowdown. Strong inflows continued in India, while in China, gold demand remained moderate as the government’s recent stimulus measures drew attention to the stock market. 

 


India's Gold Demand Strong Despite Normalization, China Struggles Amid Economic Pressures 


Although gold demand in India has normalized after the surge following import duty cuts, it remains strong. In August, gold imports surged to an unprecedented 136 tons. September’s figures declined to 55-57 tons but remained above the yearly average. Market reports indicate early signs of a revival in gold buying due to ongoing festivals, with demand largely driven by wedding purchases. 


On the other hand, demand in China, the largest gold buyer, remains under pressure. While wholesale gold demand increased during the expected sales boost over the National Day holiday at the start of October, demand stayed below the 10-year average. 


The continued challenges in China’s economy and record-high gold prices are leading to weak retail demand. Moreover, the market rally triggered by the government’s stimulus measures also weighs on bullion and coin investments. However, as the effects of the stimulus measures gradually materialize in the economy, disposable income and consumer confidence are expected to rise, supporting gold demand. 


In conclusion, considering falling global interest rates, high geopolitical risk, strong central bank demand, and the expected demand recovery in China, the positive outlook for gold appears likely to continue. Meanwhile, the upcoming U.S. elections may act as a catalyst for market expectations. 

bottom of page