Gold Trading 2025 Outlook: What's the Next Move After the Pullback from Historical Highs

Over the past year and a half, the global investment market has been swept by a gold rush. As of October 2024, international spot gold(XAU/USD) surged to a historic high of $4,400 per ounce. Although there was a technical correction afterward, market participation remains hot. How strong is this round of gold price increase? According to Reuters data, the gold rally in 2024-2025 has approached the highest levels in nearly 30 years—exceeding the 31% during the 2007 crisis and the 29% in 2010.

While many investors are eager to position themselves, a core question remains: what is the underlying logic of this wave? Is there still room for further upward movement?

Three forces driving gold back into favor

Trade policy-induced risk aversion heating up

In early 2025, a series of tariff policies were introduced intensively, sharply increasing market uncertainty. Historical experience shows that whenever major policy changes occur, investors tend to turn to gold for safety. During the US-China trade friction in mid-2018, gold prices typically saw short-term gains of 5-10%. The current situation is similar, with safe-haven funds flowing into precious metals markets.

The Fed’s rate cut expectations fueling the rally

The Federal Reserve’s interest rate policies have an inverse relationship with gold prices—rate cuts weaken the dollar’s attractiveness, lowering the opportunity cost of holding gold, and increasing its relative allocation value. According to the latest data from CME interest rate tools, there is an 84.7% probability of a 25 basis point rate cut at the December meeting.

It’s worth noting the concept of real interest rates: Real interest rate = Nominal interest rate - Inflation rate. Every Fed rate decision directly influences the nominal rate, thereby changing the real interest rate, making gold prices highly sensitive to Fed decisions. After a rate cut in September last year met expectations, gold temporarily declined because the market had already priced in this expectation.

Central banks continue to increase gold reserves

According to data released by the World Gold Council(WGC), in the first three quarters of 2025, global central banks’ net gold purchases reached 634 tons, with 220 tons bought in the third quarter alone—up 28% from the previous quarter. More notably, in WGC’s June survey, 76% of responding central banks indicated they would moderately or significantly increase their gold reserves over the next five years, while most expect the dollar’s reserve ratio to decline. This reflects a long-term rising trust in gold among global central banks.

Other deep factors boosting gold

Global high debt environment limits policy space

By 2025, global debt has reached $307 trillion. High debt levels mean central banks have limited flexibility in adjusting interest rates, favoring accommodative monetary policies, which directly suppress real interest rates and indirectly boost gold’s appeal as an alternative asset.

Concerns over the US dollar’s reserve currency status

With expectations of a weakening dollar and shaken market confidence, gold priced in dollars benefits, attracting large capital inflows into precious metals markets.

Geopolitical tensions increasing risk aversion

Ongoing Russia-Ukraine conflict, instability in the Middle East, and other events heighten global demand for safe assets, further highlighting gold’s defensive attributes.

Community sentiment amplifies short-term effects

Continuous media coverage and social media buzz drive a rush of funds into chasing gains, causing gold prices to soar rapidly in the short term.

Institutional outlook on gold prospects

Despite technical corrections, major investment banks remain cautiously optimistic about gold’s medium- and long-term outlook:

J.P. Morgan’s commodities research team views this correction as a “healthy adjustment,” and after assessing short-term risks, raised their Q4 2026 target price to $5,055 per ounce.

Goldman Sachs maintains an optimistic stance, sticking to a target of $4,900 per ounce by the end of 2026.

Bank of America also remains bullish, previously raising their 2026 gold target to $5,000, and recent strategists even hinted that gold could reach $6,000 next year.

Leading domestic jewelry brands(Chow Tai Fook, Luk Fook, Chow Sang Sang, and Zhou Shengsheng) have stable reference prices for pure gold above 1,100 RMB/gram, with no signs of significant decline. These signals all point to sustained medium- and long-term support for gold.

Practical investment advice for precious metals trading

After understanding the underlying logic behind gold prices, the next question is: how to participate based on your own situation?

Opportunities for short-term traders

For experienced traders, the current volatility provides many profit opportunities. The gold market is highly liquid, with relatively clear short-term signals. During sharp rises or falls, the momentum of bulls and bears is easy to see. Skilled traders can track key US economic data via economic calendars and capture volatility before and after data releases.

Risk tips for novice investors

If you are still building trading experience, it’s advisable to start with small amounts. Never blindly increase positions just because others are profiting—if your mindset collapses, losses can be hard to bear. Gold’s annual volatility averages 19.4%, comparable to stocks at 14.7%, so its fluctuations should not be underestimated.

Psychological preparation for long-term holders

Those planning to buy physical gold for long-term allocation should be prepared for significant fluctuations. Although the medium- and long-term trend is positive, extreme moves—doubling or halving—may occur. Transaction costs for physical gold typically range from 5% to 20%, which should be included in the total cost.

Practical asset allocation strategies

If you want to include gold in your portfolio, avoid over-concentration. Gold should be part of a diversified asset allocation, not a sole bet. Some advanced investors even hold long-term positions while exploiting short-term price swings for arbitrage—especially around US market data releases—but this requires strong risk management skills.

Three key risk factors to remember

1. Gold’s volatility cycle is long; a typical observation window is ten years, during which large swings can occur.

2. Short-term markets are easily driven by US economic data, Fed meetings, and other events; setting stop-loss points in advance is essential.

3. Do not allocate all your funds to a single asset; diversification remains the prudent approach.

The current gold market presents both opportunities and risks. Understanding the underlying logic and aligning it with your risk tolerance will help you navigate this precious metals trading wave more steadily.