Is there still room for gold prices to rise in 2025? The three main drivers behind the gold curve

Entering 2025, the global financial markets are turbulent, and gold, an ancient asset, has once again become the focus of investors. Since breaking through $4,400 per ounce last October to hit a historic high, despite recent adjustments, institutions generally remain optimistic about the future. To understand why gold continues to reach new highs, it is essential to first clarify the underlying driving logic.

Three Core Factors Driving the Continuous Rise of Gold Prices

Policy Uncertainty Leading to Safe-Haven Demand

Since the beginning of 2025, frequent changes in tariff policies have caused market unease. Historically, similar policy shocks typically push gold prices up by 5-10% within 3-6 months. When the market doubts the future economic trajectory, the appeal of gold as a safe-haven asset clearly increases. This explains why we see gold prices perform most prominently during periods of high policy risk.

The Deep Impact of Federal Reserve Monetary Policy

Expectations of rate cuts are another major driver of gold. According to CME interest rate tools, the probability of the Federal Reserve cutting rates by 25 basis points in December is as high as 84.7%. Behind this seemingly simple figure lies a core economic principle:

Real interest rate = Nominal interest rate - Inflation rate

When real interest rates decline, the opportunity cost of holding gold decreases, making gold more attractive relative to other assets. By observing historical gold price trends, it is evident that gold almost entirely follows changes in Federal Reserve policy expectations.

It is worth noting that after the FOMC meeting in September last year, gold prices actually retreated. The reason is straightforward— that rate cut was fully in line with market expectations and had already been priced in. Powell emphasized that this was a “risk-managed rate cut,” without implying continued easing, leading the market to adopt a more cautious outlook on rate cut pace.

Continued Central Bank Accumulation Strategies

According to the latest report from the World Gold Council(WGC), central banks worldwide have purchased approximately 634 tons of gold in the first nine months of 2025. Even more noteworthy, 76% of surveyed central banks plan to increase their gold reserves over the next five years. This reflects an important structural trend: confidence in US dollar reserves is waning, and gold’s status as the “ultimate trust asset” is being reaffirmed.

Other Important Backgrounds Driving Gold Prices

Debt and Inflation Persistent Dilemmas

By 2025, global debt has reached approximately $307 trillion. High debt levels mean policymakers are constrained—they cannot significantly raise interest rates (as this would increase debt burdens), so monetary policy tends to remain relatively accommodative. This structural low-interest environment provides long-term support for gold.

Geopolitical and Confidence Crises

The ongoing Russia-Ukraine conflict and tense Middle East situations continue to boost demand for safe-haven assets. Meanwhile, doubts about the US dollar’s status as an international reserve currency are rising, further enhancing gold’s allocation value.

Self-Reinforcing Market Sentiment

Social media and news cycles play a significant role. Continuous price increases attract short-term capital inflows, which in turn push prices higher—this is a typical short-term momentum effect, and it is most prone to sharp reversals at high levels.

Institutional Forecasts Ignite Long-Term Optimism

Despite recent volatility in gold prices, major international banks remain consistently optimistic:

• JPMorgan sets its Q4 2026 target at $5,055 per ounce, viewing current adjustments as a “healthy bottoming process.”
• Goldman Sachs maintains a target of $4,900 per ounce by the end of 2026.
• Bank of America strategists even suggest gold could break $6,000 next year, raising their 2026 target to $5,000.
• The prices of physical gold jewelry from well-known international jewelry brands remain stable above 1,100 TWD/gram, with no obvious decline.

Practical Strategies for Different Investors

After understanding the logic behind the gold price curve, the key is to find an approach that suits your risk appetite. But first, honestly ask yourself: how much volatility can I tolerate?

For Short-Term Traders

If you have some trading experience, the current volatility environment in gold actually presents good profit opportunities. The key is to learn how to use economic calendars to track US data releases, especially non-farm payrolls, inflation data, and other key indicators—these releases often cause the most dramatic swings in gold prices and are the most lucrative periods for short-term trading.

Start small and test the waters; never rush to increase positions before fully understanding the market. Losses caused by emotional breakdowns are often the most severe.

For Long-Term Holders

If you are bullish on gold’s 5-10 year outlook, be prepared psychologically: the average annual volatility of gold is 19.4%, even higher than the S&P 500’s 14.7%. This means you may experience drawdowns of 50% or more during holding periods. The ability to hold through these fluctuations is more important than timing the entry.

Transaction costs for physical gold are also significant—generally between 5% and 20%. These costs will materially erode your returns.

Portfolio Allocation Ideas

Using gold as part of your investment portfolio is undoubtedly wise, but the proportion should not be too high. Since gold’s volatility is comparable to stocks, there’s no reason to allocate all your assets to it. A reasonable range is 5-15% of your total assets.

Advanced Approach: Combining Long and Short Strategies

If you want to participate in the long-term upward trend of gold while maximizing short-term gains, consider this combination: core holdings for the long term, and short-term trading around US market data releases to capitalize on volatility. This requires solid technical analysis skills and strict risk control discipline.

Important Risk Warnings

Although gold has a safe-haven halo, it is not a risk-free asset. Several points must be kept in mind:

Volatility should not be underestimated; a 19.4% annual fluctuation means prices could swing nearly 20% within 12 months, requiring strong psychological resilience.

Gold’s cycle is very long; over a decade, it can double or be cut in half. Patience and confidence are essential.

For investors in Taiwan, fluctuations in USD/TWD exchange rates directly impact the returns when denominated in TWD. This is an often overlooked but significant cost.

Foreign currency-denominated assets carry exchange rate risk, which cannot be avoided.

Technically, gold still requires vigilance—especially around US economic data releases and Federal Reserve meetings—when gold prices often experience sharp swings. These moments are both opportunities and traps; novice investors must exercise extra caution.

Overall, the gold market in 2025 is far from over. Whether from a long-term bullish perspective or short-term trading opportunities, there is space for investors with different risk preferences to participate. But the prerequisite is always: understand the market first, then invest with real money.