A tale of two halves in 2025, a sort of landing!

Dec 23, 2024

Gold Jewels GabrielAll eyes are on the US. Trump’s second term may provide a boost to the local economy but could equally elicit a fair degree of nervousness for investors around the world.

As gold investors’ look into 2025, market consensus suggests that the Fed will deliver 100 bps in cuts by year end, with inflation softening but still above target. European central banks will also likely cut rates by a similar amount. The US dollar is expected to remain flat or slightly weaken as conditions normalise, while global growth remains positive but continues to grow below trend.

In this context, the actions of the Fed and the direction of the US dollar will continue to be important drivers for gold. But just as the past few years have shown, these two are not the only factors that determine gold’s performance.

World Gold Council-WGC said, we instead rely on a more robust framework that allows us to capture the contribution of all sectors of gold demand and supply. Specifically, WGC look at the role of,

1: Economic expansion – and its direct effect on consumer demand.

2: Risk and uncertainty – as a trigger for flows from investors looking for effective hedges.

3: Opportunity cost – making gold more (or less) attractive relative to bond yields &

4: Momentum – which can boost trends or, equally, mean-revert them.

Our analysis based on QaurumSM suggests that, if the economy were to perform according to consensus in 2025, gold may continue to trade in a similar range to that seen in the last part of the year, with the potential for some upside. “As we discussed in our mid-year outlook, this implied performance likely indicates that gold is efficiently reflecting all the currently available information” WGC.

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