For the past two years, JPMorgan strategists have consistently recommended investing in gold, and their advice has proven correct. On Tuesday, the bank once again identified gold as the most attractive commodity to invest in for 2025. According to a team led by Natasha Kaneva, the Head of Global Commodities Strategy at JPMorgan, gold remains a top choice for hedging against the highly uncertain macroeconomic environment expected when the Trump administration takes office in 2025.
So far this year, gold prices have risen by approximately 30%. On Monday, gold experienced significant price increases, driven by a surge in safe-haven demand amid geopolitical tensions in the Middle East and North Korea, as well as optimism surrounding Chinese gold demand.
In terms of demand for gold, investors are closely watching the People’s Bank of China (PBOC). In April of this year, the PBOC ended an 18-month-long gold-buying spree, but resumed purchases in November with an additional 5 tons. This move was seen as an opportunistic purchase after gold prices pulled back from their highs, with the central bank buying on the dip.
According to the latest report by the World Gold Council (WGC), central bank gold purchases surged to 60 tons in October, with the Reserve Bank of India (RBI) leading the way by adding 27 tons. From January to October of this year, India’s gold purchases totaled 77 tons. Looking ahead to 2025, central bank demand is expected to remain a key driver of the gold market and play a significant role in gold price increases.
The World Gold Council also highlighted in its report that the outcome of the U.S. presidential election dealt a blow to gold’s upward momentum earlier this year. Currently, the gold market is restrained by the lack of clear bullish factors, making it difficult to attract investors back into the market.
Looking ahead to 2025, the gold market is likely to face various challenges. These include sustained weakness in Chinese demand, higher bond yields, and a stronger U.S. dollar that investors in the West will need to contend with. Additionally, the Trump administration is expected to push forward an “America First” economic policy, potentially resulting in stronger economic growth, higher inflation, higher interest rates, and a stronger U.S. dollar. These factors could, at least in the short term, dampen investors’ willingness to increase their gold holdings.
Nonetheless, Bank of America remains optimistic about the gold market in 2025, predicting that gold’s current price consolidation could continue into the first half of next year but break above $3,000 per ounce in the second half, while maintaining an average price target of $2,750 per ounce. The bank’s Head of Metals Research, Michael Widmer, pointed to the U.S. government’s ballooning debt as one of the key factors supporting gold prices. At the same time, the growing U.S. fiscal deficit amplifies risks stemming from the global trend of “de-dollarization,” which should not be underestimated.
