Analysis of Future Gold Price Movement: Outlook for Gold Prices in 2025

Why is Gold XAU/USD Continuing to Strengthen?

The Federal Reserve announced its latest interest rate decision, lowering rates by 25 basis points in September, and gold prices closed down 0.83%. So how should we assess the future price trend of gold?

In 2025, gold prices performed strongly, repeatedly breaking historical highs, prompting major institutions to raise their gold price targets. After the announcement of the Federal Reserve's 25 basis point rate cut in September, gold prices surged and then fell back, closing down 0.83% on that day. Facing such market volatility, many investors are caught in hesitation: is it too late to enter the market now? Should they increase their positions when prices drop? Should investors holding gold take profits?

To make informed investment decisions, the key lies in understanding the fundamental reasons behind the fluctuations in the gold market prices. By analyzing the fundamentals, investors can maintain a calm judgment amidst market volatility. Below is an in-depth analysis of the key issues currently affecting the gold market:

• The Core Logic of Gold Price Fluctuations: Why Did Gold Suddenly Surge?
• Why did gold prices fall after the Federal Open Market Committee ( FOMC ) meeting?
• Analysis of Future Gold Price Trends and Investment Strategies
• Current market entry assessment

Market Drivers of Strong Gold Price Increases

The increase in gold prices for 2024-2025 has reached a nearly 30-year high, surpassing the historical increases of 31% in 2007 and 29% in 2010.

The main driving force behind the strong rise in gold prices.

The core driving factor behind the recent strengthening of gold prices comes from the continuous warming of market expectations for interest rate cuts by the Federal Reserve. Multiple economic data from the United States show a weakening labor market and increasing downward pressure on the economy. In this macro environment, large amounts of capital have started to shift towards safe-haven assets like gold, seeking to preserve asset value.

The market has therefore significantly priced in the Federal Reserve's rate cut expectations, which is directly reflected in the continuously rising gold prices in the earlier period.

Technical analysis of the decline in gold prices after the FOMC meeting.

The news of the Federal Reserve's interest rate cut had already been priced in by the market before the meeting, so the 25 basis point cut was completely in line with market expectations and did not bring any additional surprises. More importantly, Powell defined this rate cut as a “risk management-style cut” and did not explicitly commit to entering a sustained rate cut cycle, which dispelled some of the market's optimism and made investors take a cautious wait-and-see approach towards future rate cuts, leading to a pullback in gold prices after a surge.

Technical Analysis: Why is the interest rate environment so critical to gold prices?

The gold market trading not only reflects the supply and demand relationship of gold itself but also mirrors investors' expectations of future prices. The most fundamental driving factor of this expectation is the market's judgment on the direction of real interest rates, which is also the core element influencing the fluctuations of gold prices:

• Declining trend in real interest rates → Rising gold prices
• Rising trend of real interest rates → Decline in gold prices

Historical data shows that gold prices have a significant negative correlation with real interest rates. Real interest rates are the result of nominal interest rates minus inflation rates. The Federal Reserve's interest rate cut policy directly affects nominal interest rates, which explains why recent fluctuations in gold prices closely follow market changes in expectations for Federal Reserve interest rate cuts.

Real Interest Rate Calculation Formula: Nominal Interest Rate - Inflation Rate = Real Interest Rate

Other important driving factors for the rise in gold prices

In addition to the interest rate environment, there is another key factor driving the continuous rise in gold prices: central banks around the world continue to increase their gold holdings, especially the People's Bank of China has significantly increased its gold reserves since March 2022.

According to data from the World Gold Council, the total net purchases of gold by central banks worldwide reached 123 tons in the first half of 2025, with a net increase of 22 tons in global official gold reserves in June alone. The association's survey report on central bank gold reserves released in June 2025 shows that most of the central banks surveyed (73%) expect the proportion of the US dollar in global reserves to decline moderately or significantly in the next five years, while the shares of the euro, yuan, and gold in asset allocation will increase.

One of the strong drivers of rising gold prices is the central banks of various countries diversifying their dependence on dollar assets.

In addition, the sharp rise in gold prices is also influenced by the following factors:

• The new U.S. president's tariff policy increases market uncertainty
• Global economic growth slowdown and persistent inflationary pressures
• Decrease in trust towards the USD
• Geopolitical risks have increased

The series of tariff policies implemented by the new president after taking office is the direct catalyst for the rise in gold prices in 2025. The potential tariff threats facing major metal imports traded on the New York Mercantile Exchange have disrupted the normal functioning of the market, damaging the relationship between spot and futures prices.

With the continuous reporting from the media after gold hit a new high and the mutual reinforcement of investor sentiment on social media, this led to a large influx of short-term capital into the gold market regardless of cost, driving the continuous rise in gold prices before the meeting.

Professional Institutions' Forecast Analysis of Future Gold Prices

Despite recent fluctuations in gold prices, professional institutions remain optimistic about its long-term trend.

UBS has raised its gold price target for the end of the year from $3,500 per ounce to $3,800, and increased its mid-2026 forecast from $3,700 to $3,900.

Goldman Sachs maintains a target price of $3,700 per ounce for gold by the end of the year and $4,000 per ounce by mid-2026.

Morgan Stanley believes that gold prices still have a 5% upside this year, expecting to break through 3800 USD/ounce by the end of the year, and may surpass 4000 USD/ounce in the first quarter of next year.

Major jewelry retailers data shows that on September 3, 2025, the price of pure gold jewelry in mainland China has surpassed 1050 CNY/g, setting a new historical high.

According to the forecasts from these professional institutions, the overall upward trend of gold may continue until 2026. Investors should pay attention to market adjustments and look for suitable buying opportunities.

Gold Allocation Strategy for Retail Investors

After understanding the logic behind the rise of the gold market, investors can formulate investment strategies more rationally. The current gold market trend is not yet over, and there is room for both medium to long-term and short-term investors to operate, but caution is needed to avoid blindly following the crowd. Here are suggestions for different types of investors:

Senior Short-term Trader The current market liquidity is sufficient, and the short-term direction of price fluctuations is relatively clear, especially during periods of significant price volatility, where the strength of both bulls and bears is more apparent, providing better short-term trading opportunities.

Gold Investment Beginners If you plan to engage in short-term trading, be sure to start with a small amount of capital to test the waters and avoid blindly increasing your investment. Use an economic calendar to track the release times of U.S. economic data to assist in your trading decisions, which can effectively reduce risks.

Long-term physical gold investors need to be mentally prepared for significant price fluctuations at this stage. Although the long-term trend is bullish, there may be significant adjustments in between, and investors need to have sufficient psychological resilience.

Asset Allocation Investor Gold can be an important component of an investment portfolio, but it should be noted that the volatility of gold is no less than that of stocks, and excessive concentration in gold should be avoided. Diversifying various asset classes can effectively reduce the overall portfolio risk.

Key Points to Note When Investing in Gold:

• The average annual price volatility of gold reached 19.4%, higher than the 14.7% of the S&P 500.
• The investment cycle for gold is relatively long, and it can achieve value preservation over a time dimension of more than 10 years, but during this period it may experience a doubling or a halving.
• The transaction cost of physical gold is relatively high, generally between 5% and 20%.
• Avoid excessive concentration in investments and maintain a diversified asset allocation.
• Pay attention to macroeconomic data and central bank policy changes, and adjust investment strategies in a timely manner.

By rationally analyzing the driving factors of gold prices and changes in the market environment, investors can make more informed investment decisions in a volatile market, whether seizing opportunities for upward movement or avoiding risks of decline, allowing them to respond more calmly.