Macro Backdrop: A Perfect Storm for Gold
As we move into the second half of 2025, gold continues to shine as a robust asset class in an environment defined by macroeconomic uncertainty, geopolitical volatility, and shifting monetary dynamics. The yellow metal recently surged past $2,500/oz, breaking record highs and reaffirming its role as a global safe haven. Several converging factors point toward continued strength in gold prices through year-end:
- Central Bank Accumulation
Central banks, especially in emerging markets such as China, India, and Turkey, are adding gold to their reserves at the fastest pace in decades. This de-dollarization trend is driven by geopolitical tensions, risks of sanctions, and a desire for monetary sovereignty. According to the World Gold Council, central bank gold buying in the first half of 2025 is already outpacing 2023’s historic levels, creating a strong price floor. - Persistent Inflation and Sticky Rates
While inflation has moderated from its 2022–2023 highs, core inflation remains stubbornly above central bank targets in the U.S., EU, and UK. The Fed’s reluctance to cut rates aggressively in the face of ongoing wage growth and housing inflation reinforces the appeal of gold as a hedge against the erosion of fiat purchasing power. Real yields, though off their peaks, remain volatile and do not present consistent competition to gold. - Geopolitical Risk Premium
The Russia–Ukraine conflict, instability in the Middle East, and rising tensions in the South China Sea continue to add a geopolitical risk premium to gold. With elections in major economies (U.S., India, UK) and increased polarization, investors are seeking refuge in assets uncorrelated to political uncertainty.
Technical and Investment Trends Supporting Gold
- Breakout Momentum and Technical Strength
After consolidating between $1,900–$2,100/oz for much of 2023, gold broke through multiple resistance levels in Q1 2025 and has sustained new all-time highs. Technical analysis suggests continued bullish momentum, supported by strong buying volume and healthy pullbacks. Gold miners (GDX, GDXJ) are outperforming broader equity indices, indicating confidence in the rally’s durability.
Here is the chart of GLD:
Gold had an incredible run up to 315 (on GLD), which ended in the middle of April. It has been consolidating ever since. From a pure technical perspective, gold has been working off the overbought conditions. That is a definition of a healthy bull market. The chart below illustrates a nearly perfect example of a bullish triangle pattern. Keep in mind that technical patterns are just probabilities based on our ability to observe repetitive behavior of masses.
This pattern, however, is classic. Let’s see if it works this time, meaning gold will break out to the upside after this pattern is over after a few days/weeks.
- Retail and Institutional Demand Surge
U.S.-listed gold ETFs have reversed several quarters of outflows, with SPDR Gold Shares (GLD) adding over 100 tons of gold since February. Meanwhile, sovereign wealth funds and large institutions are diversifying away from equities and bonds into gold and precious metals as part of risk-adjusted portfolios. Retail investors, too, are turning to physical bullion and coins, as premiums remain elevated, signaling strong end-user demand. - De-Dollarization and Currency Risk
A weakening U.S. dollar amid growing fiscal deficits and concerns over U.S. creditworthiness is another bullish factor. The U.S. is projected to run a deficit near $2 trillion in 2025, stoking fears of debt monetization. As the dollar’s dominance is increasingly questioned, gold’s neutrality becomes more attractive as a monetary anchor. - Green Energy and Industrial Use
Though primarily a monetary asset, gold’s industrial demand—particularly in electronics and emerging green tech—adds incremental support to prices. As AI, EVs, and digital infrastructure expand globally, so does the demand for conductive and corrosion-resistant materials like gold.
Risks and Final Outlook
While the bull case is strong, risks remain. A sharp deflationary shock, aggressive Fed rate hikes (if inflation unexpectedly resurges), or a rapid peace resolution in key geopolitical hotspots could reduce safe-haven flows. However, barring such surprises, the path for gold seems strongly upward.
Gold could reasonably trade between $2,600–$2,800/oz by year-end, with potential upside beyond that if macro or geopolitical tensions escalate further. For investors seeking protection, diversification, and long-term value, gold remains one of the most compelling assets in the current landscape.
Dennis Leontyev
