Three themes that are reshaping the gold market

Published: 1st March 2025 | Author: Stuart O’Reilly, Market Insights Manager | The Royal Mint

In 2025, several factors are poised to influence the price of gold. Whether you’re a seasoned gold investor or just curious about what drives the market, here’s a breakdown of the key dynamics likely to shape the year.

1) Geopolitics: A Year of Hope or Uncertainty?

Gold has long been seen as a hedge against the unexpected — the “unknown unknowns” that can shake global stability.

While there are glimmers of hope for peace in the Middle East and Ukraine, uncertainty still looms. The ceasefire deal between Israel and Lebanon, if it holds, could reduce the risk of a broader regional conflict. Similarly, Ukrainian President Zelensky has begun discussions of peace, though it would require concessions to Russia — and President Putin seems to have dismissed the idea of negotiations outright. If peace and stability are achieved in these regions, demand for safe-haven assets like gold might decrease, potentially pressuring prices.

But the geopolitical landscape is far from settled. Eyes may soon turn to Moldova and Georgia, where tensions are high among pro-EU and pro-Russian factions. Meanwhile, the South China Sea continues to be a flashpoint as relations between China and Taiwan remain tense. We know that historically, gold demand has increased during times of uncertainty.

After the biggest ever year for elections in the planet’s history, where roughly ¼ of the world’s population were eligible to vote and elections were held in over 70 countries, we might expect a greater degree of certainty about the economic and political priorities of the world’s major powers. However, with elections now relatively far away for many new administrations, and having got their feet under the table, 2025 could be a year of significant change. In the US, for instance, the return of Donald Trump to the presidency may herald a rise in tariffs, threatening to trigger a trade war that could further stoke uncertainty and impact investors’ portfolios – boosting demand for uncorrelated assets like gold.

“If central banks continue to reduce interest rates in 2025, we might expect gold to benefit.”

2) Monetary Policy: Interest Rates and Inflation

Central banks worldwide are pivoting away from the aggressive rate hikes of recent years, with inflation now closer to target levels. The US Federal Reserve has already cut interest rates by 0.75% since mid-September 2024, while the Bank of England has lowered rates by 0.5%.

If central banks continue to reduce interest rates in 2025, we might expect gold to benefit.

Historically, lower interest rates have generally been seen as supportive for gold prices. As bond yields fall, the opportunity cost of holding gold — which doesn’t pay a yield — diminishes. This dynamic could attract more investors to gold as a store of value in 2025.

However, the policies of President Trump could complicate the picture. Proposed tax cuts, tariffs, and deportations could stoke inflation, forcing the Federal Reserve to respond with rate hikes. Rising bond yields might dampen demand for gold, but surging inflation could still send investors scrambling for safe-haven assets.

Adding to the uncertainty is Trump’s strained relationship with Federal Reserve Chairman Jerome Powell, who he has previously criticised for raising interest rates. Jerome Powell remains the Chairman of the Federal Reserve, and the continued independence of the central bank from the political decision makers – a central pillar of modern economic policy – has been called into question in the world’s leading economic superpower. With Powell’s term set to end in 2026, his potential replacement by a Trump nominee could signal significant changes in monetary policy — and gold markets may react accordingly as the situation becomes clearer throughout 2025.

3) Central Bank Demand: A Steady Source of Support?

Central banks have been key source of demand in the gold market in recent years, and 2024 was no exception. Poland has emerged as the largest buyer, with plans to increase its gold reserves from 16% to 20% of its total holdings. Other central European countries that do not use the Euro, such as Hungary, Czechia, and Serbia, have also ramped up their gold purchases.

This trend isn’t limited to Europe. Major economies like Russia, India, China, and Türkiye have remained net buyers, reflecting a broader push by central banks to diversify reserves and reduce exposure to the US dollar. The gradual process of ‘dedollarisation’ among central banks can sometimes be overstated, but a survey of central banks in June found that 62% believe the US Dollar will account for a smaller share of global reserves in 5 years’ time, and 69% believe gold will account for a greater share. This bodes well for future gold demand, even if current levels are not sustained.

For gold investors, 2025 could be a year of competing forces. From geopolitical risks and shifting central bank policies to evolving inflation trends, the market is set to navigate a complex web of uncertainties. Staying informed and keeping an eye on the broader economic and geopolitical landscape will be key to making the most of your gold investments.

The Royal Mint Responsibly Sourced Physical Gold ETC (RMAU) tracks the spot price of physical gold and offers an opportunity for investors to access recycled gold. Around 50% of the gold held by RMAU backed by 100% recycled gold bars. Uniquely, retail investors can redeem for physical bars and coins stored at The Royal Mint’s secure vault in Llantrisant, Wales. 100% of the gold custodied is backed by London Bullion Market Association (LBMA) post-2019 Good Delivery bars.

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Three themes that are reshaping the gold market

“If central banks continue to reduce interest rates in 2025, we might expect gold to benefit.”

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