Gold could still hit $3,000 per ounce next year, but investors will have to be patient, Bank of America was quoted by Kitco.
The bank said that the current consolidation in gold prices could last through the first half of the year.
“Right now, gold is just stuck in an environment where we don’t have anything tangible to get investors back into the market,” Kitco quoted Michael Widmer, BoA’s head of metals research as saying during its 2025 Outlook webinar last week.
Gold prices have fallen from record highs of $2,800 per ounce after Donald Trump secured victory in the 2024 US presidential elections last month.
However, prices are still up nearly 30% from the start of this year. Gold had hit a series of record highs over the last few months.
Prices on COMEX had first breached the $2,600 per ounce level for the first time ever, and then broke above $2,700 and $2,800 in October due to heightened geopolitical tensions.
However, as Trump won the elections, the dollar had surged, weighing on demand for the precious metal.
A stronger dollar makes gold more expensive for overseas buyers as it is priced in the greenback.
At the time of writing, the February gold contract on COMEX was $2,693.09 per ounce, up 0.3% from the previous close.
Headwinds for gold demand
America’s second-largest bank noted that gold could face some headwinds next year as China’s demand remained poor, while western investors have increased their holdings of bonds and the dollar.
BofA noted:
The Trump administration will, in all likelihood, push through a policy mix that, through stronger growth, higher inflation, higher rates, and a stronger USD, might well limit the appetite of investors to increase gold purchases in the near term.
The bank said Trump’s trade tariffs and other America-first policies could lead to a slowdown in the Federal Reserve’s rate-cut cycle in 2025.
Analysts at the bank expect only two rate cuts next year, one in March and the other one in June.
The US Fed had already cut interest rates twice this year, and the market expects another cut later this month.
Till now, the Fed has cut rates by a total of 75 basis points.
Bullion to rise despite challenges
Despite the challenges, the bank expects gold and silver to gain ground in 2025, fueled by safe-haven demand on economic uncertainty and geopolitical turmoil.
Silver has climbed more than gold this year, rising more than 30% since January.
In its outlook, BofA expects gold prices to average $2,750 per ounce in 2025, unchanged from its previous estimate.
It expects prices to touch $3,000 an ounce in the second half of the year.
While the US economy may demonstrate resilience next year, the analysts highlighted the government’s burgeoning debt as a major factor that could support gold prices.
“We remain concerned about an uncertain macro environment and also the fiscal outlook,” BofA analysts were quoted by Kitco.
The national debt is projected to reach a new record high as a share of the economy within the next three years, well within the next presidential term. Central banks remain large holders of government bonds, and the fiscal outlook provides a strong incentive to further diversify reserves and add gold, which has been a popular trade.
Central banks to continue gold purchases
The American bank said that investments may suffer due to a slower cycle of rate cuts by the Fed next year.
However, increased purchases by central banks may support gold.
Widmer said that it was difficult to overstate the risks posed by the growing US deficit on the ongoing de-dollarisation trend.
“If you’re in the business of preserving wealth and there’s concern about the asset you’re most exposed to, that certainly opens up the possibility of more diversification,” Widener was quoted by Kitco.
“There are not that many assets banks can hold other than gold.”
Investors will also eye the demand from the People’s Bank of China.
China’s central bank finished an 18-month spree of gold purchases in April.
The bank did not purchase the precious metal till October, before resuming purchases in November again.
China remains the world’s largest consumer of gold, followed by India.
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