Gold prices have reached unprecedented levels, with spot gold trading at approximately US$2,900 per ounce in February, marking a near 10% increase year-to-date return.

This surge follows a 27% rise in 2024, underscoring gold’s enduring appeal as a safe-haven asset. But after such a stellar year in 2024, what’s in store for gold this year?

This report delves into the multifaceted factors contributing to this upward trajectory, examining demand dynamics across various markets. We will try to cover everything you need to know about gold demand and what factors could impact prices in 2025.

Global Uncertainty Sparks a Rush to Gold

The world is facing a perfect storm of economic instability, political turmoil, and geopolitical conflicts—all of which are fuelling an insatiable demand for gold. The yellow metal, long regarded as a safe-haven asset, has seen its value surge as investors hedge against global volatility.

One of the primary drivers of this rally has been the fragile state of the global economy. The U.S., long seen as an anchor of financial stability, is now grappling with recession fears, stubborn inflation, and mounting national debt growing to over $35 Trillion dollars. Federal Reserve policy remains a wildcard, with rate cuts expected later this year—something that historically benefits gold prices by reducing the opportunity cost of holding the metal.

Meanwhile, geopolitical risks continue to escalate. The ongoing war in Ukraine has upended global markets, while tensions in the Middle East, particularly between Israel and Iran, have heightened fears of a broader regional conflict. Trade relations between the U.S. and China remain fragile, with new tariffs and restrictions threatening to slow global economic growth. In Europe, an energy crisis, political uncertainty, and Germany’s ongoing economic struggles have only added to the turmoil.

With so many factors pointing to an increasingly unstable global environment, investors are turning to gold in droves. Historically, gold thrives in times of crisis, and with uncertainty showing no signs of abating, analysts believe the current rally has plenty of room to run.

Central Banks Double Down on Gold Reserves

As individual investors flock to gold, central banks are making even bigger moves. The world’s largest financial institutions have been on a gold-buying spree, amassing record amounts of the precious metal as they seek to reduce reliance on the U.S. dollar and safeguard against economic shocks.

In 2024, central banks collectively added over 1,000 metric tons of gold to their reserves for the third consecutive year. This unprecedented buying spree was led by Poland, which added 90 tons, followed by Turkey and India, which purchased 45 and 37 tons, respectively. Even China, which had slowed its gold purchases in mid-2024, resumed buying in November, adding another 10 tons to its stockpile.

The motivations behind these acquisitions are clear. Nations with historically volatile currencies, such as Turkey and India, view gold as a hedge against potential devaluations. Meanwhile, geopolitical shifts have accelerated efforts by countries like China and Russia to diversify away from the U.S. dollar. The recent rise in global inflation has only strengthened the appeal of gold, as central banks look for ways to protect their assets from the eroding value of fiat currencies.

Gold’s role as a strategic asset is becoming more pronounced. With mounting economic and political uncertainty, analysts expect central banks to continue accumulating gold in 2025, keeping demand—and prices—at elevated levels.

Investors Pour Billions into Gold ETFs and Futures

Retail and institutional investors are also fuelling the gold rally, with money flowing into exchange-traded funds (ETFs) and futures contracts at a rapid pace. Gold-backed ETFs, which provide investors with an easy way to gain exposure to the metal without owning physical bars, have seen a resurgence in inflows after a period of decline in 2023.

In 2024, global gold ETFs recorded six consecutive months of net inflows, adding $4.3 billion in October alone. By the end of the year, total assets under management in these funds had swelled to an all-time high of $271 billion. The trend has continued into 2025, with January’s ETF inflows signalling that investor appetite remains strong.

Hedge funds and other institutional investors are also betting big on gold. Managed money positioning in COMEX gold futures has surged, with long positions more than doubling in the past year. As of late January, institutional investors held 227,871 long contracts—up 104% from the previous year—while short positions have declined by more than 65%. This shift in market sentiment underscores growing expectations that gold prices will continue climbing.

The appeal of gold investment has been further bolstered by expectations of Federal Reserve rate cuts later this year. Lower interest rates typically weaken the U.S. dollar, making gold more attractive as a store of value. Additionally, fears of an economic slowdown and rising inflation have led investors to seek out assets that offer stability in turbulent times.

Gold Demand in Asia Surges

Asia’s insatiable demand for physical gold is once again proving to be a key driver of global prices, as consumers in China and India ramp up their purchases despite record-high prices. With cultural traditions, economic growth, and currency concerns all playing a role, physical gold buying in the region is stronger than ever.

India: A Nation Obsessed with Gold

No country on Earth has a deeper cultural connection to gold than India, and despite prices hovering near all-time highs, demand remains resilient.

Gold plays a crucial role in Indian weddings, festivals, and religious ceremonies, and its status as a store of wealth remains deeply ingrained. In 2024, India overtook China as the world’s largest consumer of gold jewellery, purchasing 563.4 tons over the year, according to the World Gold Council.

The demand isn’t just coming from jewellery buyers. Indian households have long seen gold as a safe-haven investment, particularly in times of economic uncertainty. With inflationary pressures and a weakening rupee, gold has become even more attractive. The government’s push toward digital gold and sovereign gold bonds has also helped keep demand high among younger investors looking for an alternative to real estate or stock market volatility.

China: Investment Demand Meets Cultural Tradition

China remains a powerhouse in global gold consumption, with total demand reaching 554.8 tons in 2024. But unlike India, where jewellery dominates demand, China’s gold market is being driven more by investment buying.

The People’s Bank of China (PBOC) has been steadily adding to its gold reserves, and local investors are following suit. With a turbulent stock market, struggling property sector, and ongoing efforts to reduce reliance on the U.S. dollar, many Chinese investors are turning to gold ETFs, gold savings accounts, and physical bullion purchases.

The rise of gold-backed financial products, including digital gold trading platforms and gold-linked wealth management products, has also boosted interest, making it easier for younger investors to gain exposure to the metal without holding physical bars or jewellery.

“Gold demand in China is no longer just about tradition—it’s about financial security,” said an analyst at Shanghai Gold Exchange. “With economic uncertainty still looming, we expect gold buying to continue rising.”

Asia’s Role in Global Gold Prices

The sheer scale of Asian gold demand has a profound impact on global markets. Together, India and China account for nearly 50% of total global gold consumption, making their purchasing patterns a key factor in price movements.

During festival seasons such as Diwali in India or Lunar New Year in China, gold buying traditionally spikes, often leading to short-term price surges. In 2024, gold imports into India rose by  more than 35% year-over-year ahead of Diwali, as families and investors scrambled to secure gold before prices moved higher.

With central banks buying at record levels, investment demand surging, and physical purchases from Asia remaining robust, analysts predict that gold prices could remain elevated through 2025.

What’s Next for Gold in 2025?

With central banks stockpiling gold, investors flooding into ETFs, and geopolitical risks remaining high, the outlook for gold prices remains bullish. Analysts suggest that if economic uncertainty persists, that US$3,000 per ounce level for gold could be a reasonable target.

Historically, gold has performed well during times of financial distress and monetary easing. If the Federal Reserve follows through with expected rate cuts, the metal could continue to see strong investment and ETF demand. Meanwhile, any escalation in global conflicts or further deterioration in trade relations between major economies could provide additional catalysts for robust physical demand.

For now, the message from the markets is clear: gold is once again the go-to asset in an increasingly uncertain world. Whether it’s individuals hedging against inflation, central banks diversifying reserves, or institutions betting on a continued bull market, gold’s momentum is in favour of the bulls for now.

As for major bank price forecasts, here is a snapshot:

These forecasts highlight the widespread expectation that gold prices will continue rising, with most banks predicting a range between $2,600 and $3,050 per ounce in 2025. However, with less than two months into the year the price has already passed some of these targets. We may see banks revising these targets, considering the gold price performance, as the market well and truly outperformed last year’s major bank forecasts.

In summary, as we move into 2025, the market will likely be driven by political and geopolitical uncertainty. Central Bank activity will play a role in the demand story; however, we see investment demand amongst US and Chinese based exchange-traded-products as being a key factor for whether gold can continue its stellar run.

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