Although gold prices held steady at around $2,650/oz this week, limited by a strong US dollar, rising U.S. Treasury yields, and increased investor interest in US equities, UBS strategists predict that gold’s value will increase heading into 2025.
Since the start of 2024, gold prices have risen by 28%, outperforming the S&P 500 equity index. UBS strategists believe several factors will continue to drive gold prices higher in 2025, including central banks’ ongoing gold accumulation as part of their diversification strategies.
According to the International Monetary Fund (IMF) data, global central banks made their largest gold purchases of the year in October. UBS now forecasts 982 metric tons of gold will be bought in 2024, up from its previous estimation 900, and well above the post-2011 average of 500 metric tons.
There is also growing demand from investors seeking reassurance due to uncertainties like Donald Trump’s fiscal, trade, and geopolitical policies, along with ongoing conflicts in Ukraine and the Middle East. These factors are driving demand for safe-haven assets, boosting inflows into gold exchange-traded funds.
Another factor is the weak dollar, caused by the Federal Reserve’s lower interest rate by 25 basis points and speculated additional easing in the coming year. This would make the US dollar weaker, making it more affordable for non-dollar investors, which fueled gold demand and resulted in higher gold prices.
UBS forecasts gold to reach $2,900/oz by the end of 2025 and recommends a 5% allocation within a USD-based balanced portfolio for diversification. Additionally, copper and other transition metals are expected to rise in value due to growing investments in power generation, energy storage, and electric transportation.
