3 reasons why gold could hit an all-time high in early 2025

This optimistic outlook from deVere Group’s Nigel Green is fueled by three key factors influencing global markets:

1. Surge in Central Bank purchases

Global central banks are ramping up gold purchases at an unprecedented rate, a trend that began after the Russia-Ukraine conflict and has expanded as nations move away from US dollar-denominated assets.

“Gold buying has now surged to nearly three times the level it was before 2022, and the outlook suggests continued strong demand into 2025,” says Green.

According to Green, this wave of buying is not just about portfolio diversification—it’s a strategic move to mitigate risks. Countries, especially those wary of US financial sanctions, are increasingly turning to gold to shield their reserves from political and economic pressures.

Giving the example of China, Green says, “In 2023, China’s central bank added to its gold holdings for 10 consecutive months, underscoring the nation’s intention to reduce its reliance on the dollar amid growing geopolitical tensions with the West.”

“This buying intensity continued well into 2024, with net purchases of 290 tonnes recorded in the first quarter of 2024 – the fourth strongest quarter of purchases since the buying streak began in 2022,” he says.

Countries such as Turkey, Singapore, Brazil, and India are also increasing their gold reserves to protect against currency fluctuations and potential sanctions.

2. Federal Reserve’s interest rate cuts

The US Federal Reserve’s transition from aggressive interest rate hikes to potential cuts is another critical factor likely to drive gold prices higher. “Higher interest rates make gold less attractive as it doesn’t generate yield. However, with rates poised to fall, the tables are turning. Lower rates can often reduce the appeal of yield-bearing assets, drawing some investors – both retail and institutional – back into the gold market,” says Green.

3. Ongoing geopolitical tensions

In the current fragile global landscape, gold’s role as a hedge remains crucial as the risk of geopolitical shocks—including trade wars, sanctions, and rising global tensions—remains significant, says Green.

“Gold offers unparalleled protection in such scenarios, especially as concerns grow around issues such as Fed independence, global debt sustainability, and financial sanctions,” he says, adding, “One scenario that could send gold prices soaring is an escalation in financial sanctions comparable to the surge seen since 2021. Another potential trigger could be worsening debt fears in the US.”

“Against this backdrop, and should the current momentum be maintained, we could see new all-time price highs for gold in the first quarter of 2025,” he says.