Why will the international gold market in 2025 continue to be hot? Understand these three major driving factors.

Recently, the international gold market has been particularly eye-catching. From breaking through the $4,300 per ounce level in October last year to remaining volatile at high levels today, the gold price has surged nearly 30 years’ highest, surpassing 31% in 2007 and 29% in 2010. Many investors are watching: how much more room is there for this wave of international gold surge? Is it too late to enter now?

To answer these questions, first, it is necessary to understand the core factors driving the rise in gold prices. In summary, the current international gold market is mainly supported by three major driving forces.

Policy Uncertainty Boosts Safe-Haven Demand

At the beginning of 2025, a series of tariff policies were introduced one after another, leading to a clear divergence in market expectations for economic prospects. This environment of uncertainty is precisely the breeding ground for gold. Based on historical experience, whenever policy variables increase (such as the US-China trade friction in 2018), gold prices typically see a short-term surge of 5–10%. Currently, policy volatility persists, and market risk aversion sentiment is rising, naturally increasing demand for safe-haven assets like gold.

Fed Rate Cut Expectations Bring Opportunities

The Federal Reserve’s monetary policy stance has a profound impact on the international gold market. Rate cuts directly reduce the attractiveness of the US dollar, and the cost of holding gold decreases accordingly, making it relatively more attractive. The market currently expects the Fed to continue cutting rates within the year. According to CME interest rate tools, the probability of a 25 bps rate cut in December has reached 84.7%.

There is a clear negative correlation between international gold prices and real interest rates: the lower the interest rates, the more favored gold becomes. When real interest rates (nominal interest rate minus inflation rate) decline, the opportunity cost of holding non-yielding gold decreases, prompting more capital to flow into this precious metal asset.

Central Bank Accumulation Continues to Support

According to the World Gold Council, in the first nine months of 2024, global central banks purchased approximately 634 tons of gold, slightly lower than the same period last year but still far above other periods. In Q3 alone, net gold purchases by central banks reached 220 tons, a 28% increase from the previous quarter.

More notably, central banks’ perceptions of gold’s future status are evolving. In the survey published by the WGC in June, 76% of responding central banks indicated they plan to increase their gold reserves over the next five years, while most expect the proportion of US dollar reserves to decline. This long-term structural change provides a solid foundation for the international gold surge.

Other Key Factors Supporting Gold Prices

Besides the three main drivers above, the following factors should not be overlooked:

• Global debt levels are enormous. As of 2024, global debt has reached approximately $307 trillion. High debt levels limit the flexibility of interest rate policies in various countries. Central banks tend to maintain loose monetary policies, indirectly lowering real interest rates, which benefits gold.

• Declining confidence in US dollar reserves. When market confidence in the dollar wavers, gold priced in dollars becomes a more attractive asset, easily attracting capital inflows.

• Geopolitical tensions. Ongoing conflicts like Russia-Ukraine and complex Middle Eastern situations continually heighten global demand for safe-haven assets.

• Short-term market sentiment. Recent media focus and social discussions have triggered a wave of short-term capital inflows, intensifying short-term volatility in gold prices.

Institutional Outlook Remains Optimistic

Despite recent technical corrections, mainstream financial institutions remain optimistic about the future trend of international gold:

• JPMorgan’s commodities team views this adjustment as a “healthy correction” and has raised its Q4 2026 target price to $5,055 per ounce.

• Goldman Sachs reaffirms its end-2026 target of $4,900 per ounce, maintaining a positive outlook on gold prices.

• Bank of America shows a more aggressive stance, raising its 2026 target to $5,000, with strategists even predicting gold could break through $6,000 next year.

The domestic jewelry retail market also reflects market confidence. Brands like Chow Tai Fook, Luk Fook, Chow Sang Sang, and Chow Tai Seng maintain gold jewelry prices above 1,100 RMB/gram, with no significant adjustments.

Recommendations for Different Investors

After understanding the driving logic behind the international gold surge, investors should make choices based on their own situations:

Experienced short-term traders can fully leverage the current volatility. In a liquid market, directional judgment is relatively easier, and during sharp surges or drops, the momentum of bulls and bears is clear, offering more short-term profit opportunities. However, strict risk control is essential.

Novice investors should be cautious with short-term trading. Start with small amounts and avoid blindly increasing positions. Learn to use economic calendars to track US economic data releases, and consider high-volatility periods as trading references.

Long-term physical gold holders need psychological preparation. Although the medium- and long-term trend is upward, the annual average fluctuation of international gold prices is 19.4%, not inferior to the S&P 500’s 14.7%. Prices may double or halve during this period, so assessing whether you can withstand such volatility in advance is necessary.

Portfolio allocation: Gold can be part of an asset allocation but should not be overly concentrated. The transaction cost of physical gold is between 5%–20%, which should be controlled within a reasonable scope.

For investors seeking compound returns: They can hold long-term positions and perform short-term trades during periods of significant volatility, such as before and after US market data releases, provided they have sufficient experience and risk management capabilities.

Final Reminder

The international gold market is still in an upward cycle, but short-term volatility risks should not be underestimated. Special attention should be paid to market reactions around US economic data releases and Federal Reserve meetings. Gold’s investment cycle is generally longer, often over ten years, to truly reflect its value-preserving function.

No matter which investment strategy you choose, remember one thing: diversification is always the smartest choice. Never put all your funds into a single asset, no matter how attractive it seems.