Is 2025 still a good time to invest in gold? Analyzing the retail investor perspective on the logic behind gold price increases

Recently, gold prices have experienced an astonishing rally, approaching a historic high of $4,400 per ounce at one point from the end of last year to October this year. But after such a long rise, is it still a good time to buy? Many investors are debating this question. Instead of blindly following the trend, it’s better to understand why gold is rising and what its future trajectory might be.

How strong is this round of gold price increase?

According to Reuters data, the gains in gold prices for 2024-2025 have reached their highest level in nearly 30 years, surpassing the 31% in 2007 and 29% in 2010. This is not a minor correction but a genuine bull market.

International spot gold XAU/USD successfully broke through the $4,300 level this year and hit a new high in October. However, it is worth noting that a pullback has recently occurred, which presents both risks and opportunities for new investors.

The three core drivers behind the gold rally

Policy Uncertainty Boosts Safe-Haven Demand

After Trump took office, a series of tariff policies became the trigger for this year’s gold price surge. Consecutive trade policy adjustments significantly increased market uncertainty, and risk aversion sentiment rose sharply. Historically, during periods of policy uncertainty (such as the US-China trade war in 2018), gold typically experiences a short-term rally of 5-10%. When markets are confused, gold’s appeal as a safe-haven asset becomes markedly stronger.

Interest Rate Changes Directly Affect Gold Attractiveness

The Federal Reserve’s rate cuts show a clear negative correlation with gold prices—lower interest rates make gold more attractive. This is because gold does not generate interest, so when US dollar interest rates decline, the opportunity cost of holding gold decreases.

Real interest rate = Nominal interest rate - Inflation rate. Every Fed rate cut decision greatly influences the level of real interest rates, thereby driving gold price fluctuations. 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. If the economy weakens further, rate cuts could accelerate, providing long-term support for gold.

Interestingly, after the September FOMC meeting, gold fell instead, because a 25 basis point rate cut was fully expected and already priced in, leading the market to adopt a wait-and-see attitude regarding future rate moves.

Global Central Banks Continue to Increase Gold Reserves

According to data from the World Gold Council (WGC), central banks worldwide have accumulated about 634 tons of gold in the first nine months of 2025, with net purchases of 220 tons in the third quarter, a 28% increase quarter-over-quarter. More importantly, 76% of surveyed central banks plan to increase their gold holdings as a proportion of total reserves over the next five years, while most expect the US dollar reserve ratio to decline. This indicates a systematic increase in gold holdings by central banks globally, a long-term trend unlikely to reverse easily.

What other factors are pushing up gold prices?

Global High Debt Environment Limits Policy Flexibility

By 2025, global debt totals approximately $307 trillion. Such high debt levels mean countries have limited room for interest rate adjustments, and future monetary policy may lean more towards easing. Easing policies tend to lower real interest rates, further enhancing gold’s relative attractiveness.

Decline in US Dollar Confidence

When the US dollar weakens or market confidence in it drops, gold, as a dollar-denominated asset, tends to benefit and attract more capital inflows. This explains why gold and the dollar often show a negative correlation.

Geopolitical Risks

Ongoing conflicts like the Russia-Ukraine war and Middle East tensions increase market safe-haven demand, making precious metals a refuge for capital. Such black swan events often trigger short-term sharp volatility.

Short-term Capital Inflows and Media Effects

Continuous media coverage and social media hype lead to large short-term capital inflows into gold markets, intensifying the rally. However, caution is needed, as these short-term factors can cause extreme fluctuations and do not necessarily indicate a sustained long-term trend.

For Taiwanese investors, foreign currency-denominated gold also involves USD/TWD exchange rate fluctuations, which can impact final returns.

How do institutions view gold prices in 2025 and beyond?

Despite recent volatility, mainstream institutions remain optimistic.

JPMorgan’s commodities team considers this correction a “healthy adjustment,” and after warning of short-term risks, they are more bullish on the long-term outlook, raising their Q4 2026 target price to $5,055 per ounce.

Goldman Sachs reaffirmed their 2026 year-end target of $4,900 per ounce, maintaining an optimistic outlook.

Bank of America strategists have raised their 2026 gold target to $5,000 per ounce, with potential to break through $6,000.

Major domestic jewelry brands (Chow Tai Fook, Luk Fook Jewelry, Chao Hong Ji, Chow Sang Sang, etc.) still quote pure gold jewelry prices above NT$1,100 per gram, with no significant decline, reflecting market confidence in long-term gold prices.

Should retail investors enter now?

The answer depends on your investment style and risk tolerance.

If you are a short-term trader

Gold’s volatility offers many opportunities for short-term trading. When the market surges or plunges, the momentum is often clear—catching the rhythm can be profitable. But you need some trading experience and mental resilience. Use economic calendars to track US economic data to assist decision-making. Volatility is often most pronounced around US economic releases or key meetings.

If you are a beginner wanting to try short-term trading

Strongly recommend starting with small amounts—avoid blindly increasing positions. The average annual fluctuation of gold is 19.4%, already higher than the S&P 500’s 14.7%, so volatility is not to be underestimated. If your mindset collapses, losses can be quick and severe.

If you want to buy physical gold for long-term holding

Be prepared for significant fluctuations. Physical gold has higher transaction costs, typically between 5-20%. While long-term prospects are positive, short-term risks include potential halving of value, and it may take over 10 years to truly realize value preservation and appreciation.

If you want to allocate gold in your investment portfolio

Absolutely feasible, but don’t put all your assets into it. Gold’s volatility is not lower than stocks; it should be part of a diversified portfolio, not the sole investment. Keep its proportion within a reasonable range.

Advanced approach: Long-term holding + short-term trading

If you have experience and risk management skills, you can combine long-term holdings with short-term trades based on price fluctuations. US market data releases often cause the most volatility, providing opportunities to trade during these periods.

What should you know before investing in gold?

Gold is a “globally trusted reserve asset,” and its medium- to long-term fundamentals remain unchanged. But in practice, be aware of several risks:

First, gold’s average annual volatility is 19.4%, exceeding the average of stock indices—don’t underestimate its risks.

Second, gold’s cycle is very long. As a store of value, it requires a perspective of over 10 years, during which it could double or be halved.

Finally, transaction costs for physical gold are high—5-20%—which significantly impacts short-term gains. Considering USD/TWD exchange rate fluctuations further increases costs.

Overall, the gold rally in 2025 is not over, but blindly following the trend is unwise. Based on your investment experience, risk appetite, and capital situation, formulate a reasonable plan—this is the most prudent approach.