Gold Investment Outlook: Why Will Gold Fluctuate in 2025 and When Might It Correct?

In October 2024, gold broke through the $4,400 per ounce mark to hit a record high, prompting an immediate market correction. For investors, the key question is not just “Will gold continue to rise?” but “When will gold fall? What is the logic behind the volatility?” This is the foundation for making rational decisions.

Why Has Gold Become the Investment Focus for 2025?

According to Reuters data, the gold price increase from 2024 to 2025 has approached the highest in nearly 30 years, surpassing 31% in 2007 and 29% in 2010. This rally is not unfounded but the result of multiple overlapping factors.

Global Central Banks Continue Net Gold Purchases

The World Gold Council(WGC) reports that in Q3 2025, global central banks net purchased 220 tons of gold, a 28% increase from the previous quarter. In the first nine months, total gold purchases reached approximately 634 tons, slightly lower than the same period in 2024 but still significantly higher than other historical periods. Notably, 76% of surveyed central banks expect to “moderately or significantly increase” their gold holdings over the next five years, while most expect their dollar reserves to decline. This reflects growing confidence in gold as a reserve asset worldwide.

US Dollar Depreciation and Rising Safe-Haven Sentiment

Current market trust in the US dollar is waning. Gold, priced in dollars, benefits when the dollar weakens. Meanwhile, trade policy uncertainties, ongoing Russia-Ukraine conflict, and Middle Eastern tensions have all boosted safe-haven demand. Historical experience (such as the US-China trade war in 2018) shows that during periods of policy uncertainty, gold prices often experience short-term rallies of 5–10%.

Real Interest Rates and Gold’s Negative Correlation

Gold prices have an inverse relationship with real interest rates. Real interest rate = Nominal interest rate - Inflation rate. The Federal Reserve(Fed)'s rate cut expectations directly influence nominal rates and thus affect gold’s attractiveness. According to CME interest rate tools, there is an 84.7% chance that the Fed will cut rates by 25 basis points at the December meeting. This also explains why gold price fluctuations are almost tightly linked to Fed policy expectations.

Long-term Concerns in a Global High-Debt Environment

By 2025, global debt totals reach $307 trillion(IMF data). High debt levels limit countries’ interest rate policy flexibility, leading to accommodative monetary policies that further lower real interest rates and indirectly boost gold appeal. Additionally, slowing global economic growth coupled with inflation pressures supports the medium- to long-term upward logic for gold.

Experts’ Predictions for Gold Prices in 2025–2026

Despite recent volatility, many top investment banks remain optimistic about gold prospects:

J.P. Morgan Commodity Team: Views recent corrections as “healthy adjustments,” raising the Q4 2026 target price to $5,055 per ounce.

Goldman Sachs: Reaffirms the end-2026 target of $4,900 per ounce, maintaining a positive outlook on gold.

Bank of America: Not only raises the 2026 target to $5,000 per ounce but also suggests that gold could even challenge the $6,000 mark next year.

Market Reality: Leading jewelry brands(Chow Tai Fook, Luk Fook Jewelry, Chao Hong Ji, Chow Sang Sang)still maintain reference prices for pure gold jewelry in mainland China above 1,100 yuan/gram, with no significant decline observed.

When Will Gold Fall? Risks Investors Should Watch

While the long-term logic supports gold’s rise, short-term corrections cannot be ignored:

US Economic Data Release Periods: Inflation data, employment reports, and GDP figures often trigger intense volatility around their release.

Fed Policy Shift Signals: If the Fed changes its rate cut expectations or hints at more aggressive policies, gold may face pressure.

Unexpected US Dollar Appreciation: A sudden rebound in confidence in the dollar will put downward pressure on gold.

Easing of Geopolitical Risks: If the Russia-Ukraine situation or Middle Eastern conflicts show signs of resolution, safe-haven demand could quickly decline.

Community Sentiment Reversal: Short-term media hype and social media buzz have previously driven large capital inflows; a sentiment reversal could similarly trigger rapid sell-offs.

It’s important to remember that gold’s average annual volatility is 19.4%, higher than the S&P 500’s 14.7%. Short-term fluctuations do not indicate a change in the long-term trend.

Different Investment Strategies for Gold

Experienced Short-term Traders: Volatile markets offer good opportunities; liquidity is ample, and direction is relatively easier to judge. It is recommended to follow economic calendars, monitor US data, and capture obvious swings during US trading hours.

New Investors: Avoid blindly chasing high prices. Start with small investments to learn risk control and understand gold’s volatility before increasing positions. Physical gold trading costs can be as high as 5%-20%, so caution is advised.

Long-term Allocators: Entering now requires psychological readiness for significant mid-term volatility. Gold cycles last(10+ years), during which prices can double or halve. It is advisable to control allocation ratios and not invest all funds solely in gold.

Balanced Investors: Can combine long-term holdings with short-term trading, executing rolling trades during price fluctuations based on a solid foundation. This requires experience and risk management skills.

Core Investment Tips

• The upward logic for gold in 2025 remains intact, supported by central bank purchases, Fed policies, and geopolitical risks.
• Short-term declines depend on Fed policy shifts, US dollar appreciation, or fading safe-haven sentiment.
• Taiwanese investors trading foreign currency-denominated gold should also consider USD/TWD exchange rate fluctuations affecting actual returns.
• Regardless of strategy, risk management and position control are the keys to long-term profitability.