Few investments did better in 2024 than gold, which is wrapping up its best year since 2010 and one of its largest annual gains on record. Wall Street’s gold bugs think prices will climb even higher in 2025.
Prices for the precious metal are up 27% in 2024 to $2,617.20 a troy ounce. That is better than the S&P 500’s 25% gain and not far behind the 31% increase of the technology-stock-laden Nasdaq Composite Index.
Gold futures hit a record ahead of the U.S. presidential election but have declined since then. That was expected, though, as investors who had been nervous about the election’s outcome moved money from the haven and back into riskier assets.
Analysts at JPMorgan, Goldman Sachs and Citigroup share a price target of $3,000. Here are some of their reasons:
Lower interest rates
The extent to which the Federal Reserve cuts interest rates remains to be determined, but investors expect further reductions in 2025. The lower rates get, the lower the opportunity cost of owning gold, which pays no interest or dividends.
Analysts expect some portion of the $6.7 trillion held in money-market funds to find its way into exchange-traded funds that hold gold, such as SPDR Gold Shares, as investors become disenchanted with declining yields. “This is the most bullish part of the cycle for gold,” said Greg Shearer, head of base- and precious-metals strategy at JPMorgan.
Geopolitical uncertainty
Investors large and small tend to flock to gold in times of heightened conflict. And there is plenty of that headed into 2025, from wars in the Middle East and Ukraine to President-elect Donald Trump’s vows to escalate trade disputes with China and other countries. The prospect that inflation will flare up again also has investors on edge.
Investors in China have been especially enthusiastic about buying gold lately, given the country’s slumping economy and stocks , as well as Trump’s threats to levy tariffs on its exports to the U.S.
Central-bank buying
Central banks around the world, especially in countries that have strained relationships with the West, have been gobbling up gold. China, in particular, is a powerful source of demand, with official gold reserves more than tripling since 2008, according to Goldman Sachs.
Western sanctions on Russia after it started its full-scale invasion of Ukraine in 2022 prompted some central banks to move away from dollar-based assets. Instead, they are keeping more of their reserves at hand and in an asset, gold, that is beyond the reach of foreigners .
The Russia sanctions, Goldman analysts said, “marked a clear turning point, leading many emerging-market central banks to rethink what is risk-free.”
In a 2024 poll of central bankers, 29% said they intended to increase their gold reserves in the subsequent 12 months, according to the World Gold Council, the most since it started the survey in 2018.
Little industrial demand
Another thing gold has going for it is there are few uses beyond as a store of wealth. There is jewelry, of course. But jewelry isn’t just about demand. It becomes an important source of supply when gold prices rise and people have more incentive to sell grandma’s old jewelry to scrappers.
“Gold doesn’t have the industrial baggage of other commodities that could really get pulled down under this sort of trade-disruption hit,” JPMorgan’s Shearer said.
That means a slowdown in economic activity, such as what would be expected in a trade war with China , doesn’t really hit gold demand the way it would other precious metals with industrial uses, such as silver and platinum.
Momentum
Gold rallies tend to be long-lasting. In five of the past six years that gold futures have risen by at least 20%, prices rose again the following year. And in those five years, the average increase was more than 15%, according to Citi analysts.
The only year in which gold followed a 20% or better gain with a down year was in 2021, when prices fell 3.6% after gaining about 25% in 2020.
Write to Ryan Dezember at ryan.dezember@wsj.com
