Introduction to Gold’s Performance in 2025
Gold has had an exceptionally strong start to 2025, with its value increasing by 26% in the first half of the year. This significant rise is attributed to several key factors, including a weaker US dollar, ongoing geopolitical risks, robust investor demand, and continued purchases by central banks.
Factors Influencing Gold’s Price
The price of gold is influenced by a combination of factors, including economic expansion, risk and uncertainty, opportunity cost, and momentum. In the first half of 2025, a weaker US dollar, range-bound interest rates, and a highly uncertain geoeconomic environment led to strong investment demand for gold. The World Gold Council notes that while some of these drivers are expected to persist, the path forward for gold prices remains highly dependent on multiple factors, including trade tensions, inflation dynamics, and monetary policy.
Geopolitical Uncertainty and Its Impact on Gold
Geopolitical uncertainty is likely to keep investors on edge, with concerns remaining that conditions could deteriorate quickly. Dollar-related pressures are likely to persist, and questions around the end of US exceptionalism may dominate investor discussions. Overall, these conditions position gold as a net beneficiary, but the gold price has already captured part of these dynamics. Sustainable conflict resolution and continued rising stock prices could lure more risk-on flows and limit gold’s appeal.
Scenarios for Gold’s Performance in the Second Half of 2025
To assess the effect of varied conditions on gold’s price, the World Gold Council’s team of gold specialists has outlined gold possibilities through research, analysis, commentary, and insights. Market consensus suggests that global GDP will move sideways and remain below trend in the second half of 2025, with world inflation likely to rise above 5% as the global impact of tariffs becomes more pronounced. In response to this mixed economic backdrop, central banks are foreseen to begin cautiously lowering interest rates towards the end of the fourth quarter, with a probable 50 basis point US Federal Reserve rate cut by year-end.
Technical Indicators and Investor Appetite
Technical indicators suggest that gold’s consolidation phase over the past few months is a healthy pause in a broader uptrend, helping to ease previous overbought conditions and potentially setting the stage for renewed upside. Falling interest rates and continued uncertainty would maintain investor appetite, particularly through gold exchange-traded funds and over-the-counter transactions. At the same time, central bank demand for gold is likely to remain robust in 2025, moderating from its previous records while staying well above the pre-2022 average of 500 t to 600 t of gold uptake.
Challenges to Gold’s Performance
However, elevated gold prices are likely to continue to curb consumer demand and potentially encourage recycling, which would deter stronger gold performance. A more volatile geopolitical and geoeconomic scenario could push gold significantly higher, particularly if more substantial stagflation or recession risks materialize and investor appetite for safe-haven assets grows. On the other hand, widespread and sustained global trade normalization would bring higher yields and resurgent risk appetite, challenging gold’s momentum.
Conclusion
In conclusion, the World Gold Council’s mid-year outlook report suggests that gold remains well-positioned to support tactical and strategic investment decisions in the current macro landscape. While the fundamentals remain strong, the gold price has already captured part of the dynamics driven by a weaker US dollar, range-bound interest rates, and a highly uncertain geoeconomic environment. As such, investors should remain cautious and monitor the various factors influencing gold’s price, including geopolitical uncertainty, trade tensions, inflation dynamics, and monetary policy.
