U.S. Federal Reserve’s Hawkish Stance Sends Gold Prices Tumbling, But Analysts Expect Support in 2025
The U.S. Federal Reserve’s unexpected hawkish stance on interest rates has sent gold prices plummeting, with the precious metal hitting its lowest level in a month. The Fed’s dot plot, which measures policymakers’ outlook, now suggests the Fed will cut interest rates twice in 2025, less than the four quarter-point cuts previously expected. This has weakened the case for gold, as a stronger greenback and higher interest rates can lead to lower demand for the precious metal.
However, analysts at CNBC believe that gold prices will still find support in 2025 due to non-traditional factors. Hamad Hussein, commodities economist at Capital Economics, expects the asset to remain near its record highs due to demand from central banks, particularly China’s, and a weak macroeconomic outlook in the country.
Janet Mui, head of market analysis at RBC Brewin Dolphin, also believes that gold prices will continue to find support next year, citing structural and cyclical factors such as emerging market central banks’ desire to raise gold as a percentage of reserves and as a hedge against various macro risks.
Ewa Manthey, commodities strategist at ING, sees a “perfect storm for gold” in 2025, driven by geopolitical tensions, foreign-reserve diversification by central banks, and lower interest rates. She expects gold prices to average $2,760 per ounce in 2025.
While Manthey’s bullishness is for the short to medium-term, she notes that longer-term, Trump’s proposed policies, including tariffs and stricter immigration controls, may limit interest rate cuts and lead to a stronger dollar and tighter monetary policy, which could provide headwinds to gold.