Will gold trends remain bullish in 2025? The three main reasons behind central banks' purchases

Gold prices have experienced an astonishing rally over the past 30 years in 2024. After approaching a historic high of $4,400 per ounce in October, there was a pullback, but this rally is far from over—the key is to understand the fundamental forces driving gold prices higher.

Central Banks Increasing Reserves, Hard to Shake the Safe-Haven Status

The global central banks’ obsession with gold is heating up. According to data from the World Gold Council, net gold purchases by central banks worldwide reached 634 tons in the first three quarters of 2025. 76% of central banks believe they should increase their gold reserves over the next five years, while also expecting the share of US dollar reserves to decline.

This shift is no coincidence. In an era of high debt (global debt has reached $307 trillion), central banks are quietly rewriting asset allocation logic—the importance of gold as the “ultimate trusted asset” is being re-recognized. Central banks’ actions often precede market movements; their buying behavior itself paves the way for higher gold prices.

US Dollar Depreciation Expectations Strengthen, Gold’s Relative Attractiveness Rises

After Trump took office, a series of tariff policies triggered market volatility, and rising trade uncertainties directly boosted safe-haven demand. Historical experience shows that during periods of policy uncertainty, gold typically sees a short-term increase of 5-10% (referencing the 2018 US-China trade war trend).

Deeper logic suggests that when market confidence in the US dollar declines, gold—priced in USD—tends to benefit. Coupled with the Fed’s rate cut expectations—if the dollar weakens, the opportunity cost of holding gold decreases, further enhancing its appeal.

According to CME interest rate tools, the probability of the Fed cutting rates by 25 basis points in December is as high as 84.7%. Real interest rates (nominal rate minus inflation) are negatively correlated with gold prices; declining rates are directly bullish for gold.

Global Economic Slowdown Sparks Safe-Haven Sentiment

Geopolitical tensions continue to escalate—ongoing Russia-Ukraine war, unresolved Middle East conflicts—driving up safe-haven demand for precious metals. Meanwhile, global economic growth is slowing, inflationary pressures persist, and central banks are leaning towards easing monetary policy—all pointing toward higher gold prices.

Media buzz and social media effects also play a significant role. Continuous reports and online sentiment can lead to short-term capital inflows, creating positive feedback loops in the gold market and pushing prices higher.

What Do Institutions Expect for Gold Prices in 2026?

JPMorgan’s commodities team has raised its Q4 2026 target to $5,055 per ounce; Goldman Sachs maintains a forecast of $4,900 by the end of 2026; Bank of America is more aggressive, expecting gold to potentially reach $6,000 next year.

Major jewelry chains’ reference prices for pure gold jewelry remain stable above 1,100 yuan/gram, with no obvious decline. These signs indicate that market confidence in gold’s medium- to long-term prospects remains intact.

How Should Retail Investors Consider Entering Now?

For short-term traders—gold volatility (annual average amplitude 19.4%) exceeds that of the S&P 500 (14.7%), providing ample trading opportunities. But beginners should avoid blindly chasing highs; start with small amounts, learn to use economic calendars to track US data, and pay special attention to volatility windows around US market data releases.

For long-term holders—gold price cycles are extremely long; over a decade, it has value for preservation, but prices can double or halve along the way. Be prepared for intense fluctuations. Physical gold trading costs are relatively high (usually 5-20%), so over-allocating is not advisable.

For portfolio allocators—including gold in your investment mix is reasonable, but don’t put all your funds into it. Gold’s volatility is comparable to stocks; diversification is more prudent. To maximize returns, consider short-term trading around key economic data releases on top of long-term holdings.

Final Reminder

While gold prices have surged impressively, this rally is not over. Both medium-long and short-term opportunities exist—key is not to follow the trend blindly. Currently, gold is supported by multiple factors: central bank demand, US dollar weakness, safe-haven sentiment, and policy uncertainties. These factors are unlikely to change fundamentally in the short term. But be cautious of short-term volatility risks, especially around major economic data and policy meetings.

Physical gold trading costs are high, while digital asset gold derivatives offer better liquidity. Choosing tools that match your risk tolerance and trading cycle is the wise approach.