Will the 2025 gold market still have potential? Three major investment strategies every retail investor should watch out for

How strong is this wave of gold price rally? Simply put, the gold price increase in 2024-2025 has approached a 30-year high, surpassing 31% in 2007 and 29% in 2010. After reaching a historic high of $4,400 per ounce in October, there was a pullback, but market enthusiasm remains high. The question is: Is it still profitable to enter now?

Why Is Gold Still Rising? Three Core Factors Revealed

1. Safe-haven demand driven by tariff policies

Since Trump took office, a series of tariff policies have directly triggered this year’s price surge. Historical experience (referencing the 2018 US-China trade war) shows that when uncertainty rises, gold typically experiences a short-term increase of 5-10%. Market risk aversion heats up, and funds naturally flow into gold.

2. Federal Reserve rate cut expectations change real interest rates

This is the most complex yet crucial logic. Gold prices have an inverse relationship with real interest rates—when rates fall, gold rises.

Why? Because real interest rate = nominal interest rate - inflation rate. When the Fed cuts rates, nominal interest rates decrease, lowering the opportunity cost of holding gold, thus increasing its attractiveness.

According to CME interest rate tools, the probability of the Fed cutting interest rates by 25 basis points at the December meeting is 84.7%. In other words, expectations of Fed rate cuts are essentially a barometer of gold price trends.

The decline in gold prices after the September FOMC meeting aligns with this logic—expecting a 25 basis point cut was fully priced in, and with Powell stating this is a “risk management cut” rather than a signal of ongoing rate cuts, market participants became cautious, leading to a reasonable pullback from high levels.

3. Continued accumulation by global central banks

According to the World Gold Council, net gold purchases by central banks in Q3 2025 reached 220 tons, a 28% increase quarter-over-quarter. In the first nine months, central banks bought approximately 634 tons, slightly lower than the same period last year but still significantly higher than other periods.

More importantly, 76% of surveyed central banks believe that the proportion of gold will be “moderately or significantly increased” over the next five years, while they also expect the share of US dollar reserves to decline. This reflects a reassessment by global central banks of gold’s role as a reserve asset.

What other factors are driving gold prices?

Global debt levels are high, and monetary policy space is limited—IMF data shows total global debt reaching $307 trillion. High debt levels across countries mean limited flexibility in interest rate policies, leading to a tendency toward easing policies, which depresses real interest rates and indirectly benefits gold.

Confidence in the US dollar is waning—when the dollar weakens or market confidence drops, gold priced in USD tends to benefit, with increased capital inflows.

Geopolitical risks are rising—ongoing Russia-Ukraine conflict, Middle East tensions, and other events boost safe-haven demand, causing short-term volatility.

Community sentiment effects—continuous media coverage and social media hype lead to short-term capital inflows, reinforcing the upward trend.

How do institutions view the gold price trend in 2025?

Despite recent volatility, mainstream institutions remain optimistic about long-term prospects:

• J.P. Morgan Commodity Team: Views the pullback as a “healthy correction,” raising the Q4 2026 target price to $5,055 per ounce.
• Goldman Sachs: Maintains a target price of $4,900 per ounce by the end of 2026.
• Bank of America: Previously raised the 2026 target to $5,000, and recently stated that gold could surge to $6,000 next year.

Domestic jewelry brands like Chow Tai Fook and Luk Fook Jewelry still quote pure gold jewelry prices above 1,100 TWD/gram, with no obvious decline.

What should retail investors do now?

Gold’s annual volatility is 19.4%, exceeding the S&P 500’s 14.7%—its volatility is at a level comparable to stocks. Before entering, you need to consider what type of investor you are:

Short-term traders: Volatility is your friend. Liquidity is good, and short-term direction is relatively easier to judge, especially during sharp rises or falls when bullish or bearish momentum is clear. But beginners should be cautious—start with small amounts, avoid blindly increasing positions, and be prepared for emotional swings that could lead to losses. Using economic calendars to track US economic data can greatly aid trading decisions.

Long-term allocators: If you plan to buy physical gold or include gold in your portfolio, be prepared for significant fluctuations. Gold’s cycle is very long; over a 10+ year horizon, it can preserve and increase value, but it may also double or halve in value along the way. Transaction costs for physical gold are relatively high (usually 5-20%), so it’s not recommended to buy excessively.

Those aiming for maximum returns: You can hold long-term while exploiting short-term price swings, especially around US economic data releases, where volatility tends to be most pronounced. This requires experience and risk management skills.

Key reminder: Don’t put all your eggs in one basket. Although the long-term fundamentals for gold remain intact, short-term US economic data and Federal Reserve meetings can trigger intense volatility. For Taiwanese investors, additional consideration should be given to USD/TWD exchange rate fluctuations affecting returns.

The long- and medium-term logic behind gold price movements is indeed valid—the current trend is far from over, and both short-term and medium-long-term opportunities still exist. The key is to understand your risk tolerance and choose strategies accordingly, rather than blindly following the crowd.