Bank of America said gold prices are still expected to hit $3,000 an ounce next year, but investors need to remain patient as the current consolidation period may last into the first half of next year.
Michael Widmer, head of metals research at Bank of America, said during a 2025 outlook webinar last week: “Right now, gold is just stuck in an environment where We don't have anything tangible to bring investors back to the market in this environment. "
The second-largest U.S. bank noted that Western investors face potential rises in bond yields and a stronger dollar as demand from the Asian giant remains sluggish.
Gold faces major headwinds in new year.
The Trump administration will most likely pursue a policy mix of stronger growth, higher inflation, higher interest rates and a stronger dollar," analysts said in a report.
This is likely to limit investors' interest in increasing gold purchases in the short term.
The bank’s fixed income strategists expect
Potential trade tariffs and other U.S.-first economic policies could prompt the Fed to slow its easing cycle in 2025. Analysts expect just two rate cuts next year, one in March and another in June.
Despite the challenges, precious metals analysts expect
Gold and silver will find solid support in the new year, driven by economic uncertainty and geopolitical turmoil spurring safe-haven demand.
In its outlook, the bank expects,Gold prices will average around US$2,750 per ounce in 2025, the same as previous forecasts.
While the U.S. economy may show resilience next year, analysts stress that The U.S. government's ballooning debt is a major factor that could support gold prices.
Analysts said: "We remain concerned about the uncertain macro environment and fiscal outlook. U.S. debt as a share of the economy is expected to reach a record high within three years of the next presidential term. Central banks remain major holders of government bonds "The fiscal outlook provides strong incentives for further diversification of reserves and accumulation of gold, which has been a popular trade."
While investment demand is likely to struggle in the first half of 2025 as markets adjust to Fed monetary policy, Widmer noted,
Central banks are expected to continue buying gold and support gold prices.
He added that it is difficult to overstate the risk that growing U.S. deficits pose to the ongoing de-dollarization trend.
If you're in the business of preserving wealth and you're worried about the assets you care about most, that certainly increases the likelihood of further diversification," he said. "There aren't many assets that banks can hold other than gold.
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