Gold Price Rise in 2025 May Depend on Central Banks
Gold’s future depends on whether it restores its traditional relationship or relies on continued central bank demand.
The precious metal’s rally this year, the best since 2010, reflects its safe-haven appeal amid US monetary easing, geopolitical uncertainty and record central bank purchases, especially from emerging markets such as China. However, a closer look shows that traditional drivers such as real interest rates, the dollar and even equity markets have played a limited role.
A multi-regression analysis shows that these assets explain only a small part of gold’s price movements. Real interest rates, which are usually a strong inverse driver, show an insignificant relationship, while the weak negative coefficient of the dollar and the small positive relationship of US equity futures suggest gold continues to deviate from its historical pattern over the past five years.
ETF holdings, a key barometer of investor sentiment, have continued to decline, signaling waning retail and institutional interest. Instead, central banks are the dominant force.
Developments in US monetary policy are another piece of the puzzle. While easing has generally been supportive of gold, fading ETF flows and the dollar’s resilience amid Trump-era uncertainty raise questions about whether bullion’s rally can sustain its momentum.
Source: Bloomberg
