Gold hits $2,900, up 11% so far in 2025; will this rally continue?

 The recent rise in gold prices in 2025 is due to the threat of imposing tariffs (import duties) by US President Donald Trump.

Gold prices have continued the stellar performance of 2024 in 2025 as well. Gold prices have risen by about 11% so far this year, and on Monday it reached the level of $2,900 in the international market. 

In the domestic market too, the spot price of gold on MCX rose by more than 1% to cross the level of Rs 85,000 per 10 grams.

Experts say that the reason for the rise in gold prices in 2024 was the purchases of global central banks and investment demand. 

But the recent rise in 2025 has come due to tariff threats by US President Donald Trump, which has attracted investors away from the stock market and towards safe assets.

The Federal Reserve and Gold Prices

If the US Federal Reserve cuts interest rates, it may lead to deflation, which will indirectly benefit gold. 

However, at present the central bank has stopped cutting rates, but it will be interesting to see how long this situation lasts.

There is a lot of uncertainty about the trade war, the interest rate policies of the Federal Reserve, and the state of the global economy. 

This has worried stock market investors worldwide, and they are adopting gold as a safe investment. Also, the purchase of gold by central banks is supporting its prices.

Trump's 'Trade War 2.0' and its impact on gold prices

Analysts say that Trump's trade policy is quite different from the US-China trade war that started in 2018 because this time it is not limited to China only but is also affecting America's major trading partner countries. 

These include the European Union, Japan, South Korea, and export-dependent Asian countries like Vietnam and Malaysia.

Gold Demand Trend

According to the World Gold Council (WGC), central banks continued to buy gold in 2024 and purchased more than 1,000 metric tons for the second consecutive year. 

This purchase increased to 333 metric tons in the October-December 2024 quarter, taking the annual total to 1,045 metric tons.

According to the WGC, global investment demand grew 25% to 1,180 metric tons in 2024, a four-year high. 

This was mainly due to the demand for gold exchange-traded funds (ETFs) in the second half of the year. Global gold ETFs saw net purchases of 19 metric tons in the fourth quarter of 2024, marking an increase for two consecutive quarters. 

At the same time, demand for gold bars and coins remained stable at 1,186 metric tons.

Central banks will continue to lead gold purchases in 2025, and if interest rates are lower, gold ETF investors will join in as well. 

On the other hand, demand for jewelry may remain weak, as high prices and an economic slowdown may impact consumer spending. 

Geopolitical and economic uncertainties will persist this year as well, which may increase demand for gold as a safe asset.

Gold prices in the domestic market

Gold prices surged after Trump threatened to impose new tariffs on metal products, taking the gold to Rs 85,800 per 10 grams on MCX on Monday.

It is unclear to which countries these new tariffs will be applicable; this uncertainty has impacted global trade and led to heavy buying of gold. 

Besides, weakness in the rupee (low of 87.94) also supported gold prices in the domestic market. 

Given the current risk-on environment, gold may maintain a positive trend, and its prices may remain in the range of Rs 84,000 to Rs 86,500 per 10 grams.