Gold Prices Projected to Rise Amid Changing Economic Landscape

Investment trends significantly impact gold prices, influencing everything from mine production to scrap recovery and fabrication demand.

Historic Investment Shifts

In November 2000, CPM Group made a pivotal gold buy recommendation in its Gold Survey. They predicted a marked increase in investment demand: more investors and diverse global participants would seek to purchase more gold than ever before. Back then, gold prices were around $260 per ounce and were expected to soar past the 1980 high of $850 and remain elevated for many years.

Before 1980, economic and political turmoil drove investors to buy gold temporarily, leading to cyclical price fluctuations. CPM’s analysis in 2000 suggested that this new cycle would result in lasting gold demand rather than brief periods of purchasing.

One of the key turning points affecting the gold market today is the anticipated return of Donald Trump as U.S. president. The implications of his presidency are uncertain; however, political and economic changes might negatively influence global growth.

Considering these factors, the forecast for gold prices in 2025 points toward further increases.

Since mid-2019, gold prices have seen substantial growth. Throughout 2024, the average price was $2,370 per ounce, reflecting a 21% increase from $1,952 in 2023. CPM anticipates December could bring further price hikes, contributing to an expected overall 23% rise in gold prices for 2024. Projections for 2025 estimate an average price near $2,730 per ounce, indicating another 13% increase.

Price trends may fluctuate; an initial rise could slow during the second quarter of 2025, depending on various economic and political developments.

Potential Recession Risks

CPM has forecasted a recession possibly occurring in 2025 or 2026. If the U.S. government significantly reduces spending and adopts aggressive stances internationally, the onset of a recession might come sooner and be more severe.

Trump’s inclination towards imposing tariffs raises concerns about the potential for an accelerated recession. This mirrors the historical actions of Republican President Herbert Hoover, who enacted the Tariff Act of 1930 during the Great Depression, raising tariffs on over 20,000 imported goods and worsening economic conditions.

Anticipated Increase in Gold Output

CPM expects a 1.5% rise in global gold mine production to reach approximately 88.6 million ounces in 2025, following a 0.5% increase in 2024. However, shares of mining companies may continue to lag behind the price of gold itself due to shifts in investor behavior.

Recycled gold is projected to increase around 10% in 2025, totaling about 40.9 million ounces. This rise is expected due to higher gold prices and declining consumer economics in numerous regions. Overall, the supply of newly refined gold is expected to reach around 136.9 million ounces, marking a 3.8% increase from 2024.

Central Bank Attitudes

Central banks are anticipated to remain net buyers of roughly 8 million ounces in 2025, a slight decrease from 2024. These entities are generally more responsive to price changes compared to individual investors. In the wake of rising gold prices above $2,200 last March, central banks have tempered their purchasing activities, which is expected to continue into 2025.

A notable concern is the possibility that a politically unstable Russia might consider selling part of its vast monetary reserves, which amount to 75 million ounces.

In prior years, investors acquired between 24 to 26 million ounces of gold annually from 2021 to 2023, with an estimated 32 million ounces bought in 2024. CPM is projecting that 2025 could see purchases rise to around 44 million ounces as geopolitical and economic issues drive heightened investor interest in gold.

Given the current landscape, various economic and political factors may compel investors to continue adding gold to their portfolios, which is likely to sustain high prices and may push them toward record highs throughout 2025.

Jeffrey Christian has been a key player in the precious metals and commodities markets since the 1970s. He founded the CPM Group in 1986, which was initiated as a spinoff from Goldman Sachs & Co. and its trading branch, J. Aron & Co.