
Gold remains in the spotlight in 2025. Not only has the gold price reached over 20 new all-time highs so far, but the precious metal has surpassed the Euro as the world’s second-largest reserve asset.
Even after reaching numerous all-time highs in 2024, gold demand in 2025 has remained resilient and continues to attract sustained buying from central banks and investors worldwide. In Q1 2025, gold demand reached its highest level in nearly a decade, reports the World Gold Council.
What’s driving the gold rally?
While some skeptics dismiss the gold rally as just another speculative wave, the evidence suggests that a deeper, underlying combination of structural factors is supporting the soaring demand.
Factor #1: Economic uncertainty
HSBC recently raised their average gold price forecasts for 2025 and 2026, explicitly citing “heightened risks and rising government debt levels” as reasons for the shift in investor demand.
With almost $37 trillion in federal debt and interest costs on that debt nearing $1 trillion a year, investors are beginning to question the long-term sustainability of America’s fiscal policy. As faith in the long-term US solvency erodes, so does the global trust in the US dollar as a reliable safe haven.
And that loss of confidence is pushing investors directly into gold.
According to Bank of America:
“Rates volatility and a weaker USD should then keep gold supported, especially if the US Treasury or the Fed are ultimately forced to step in and support markets.”
Factor #2: Geopolitical tensions and trade wars
Geopolitical instability has played a critical role in gold’s performance throughout 2024 and 2025, particularly due to the ongoing US-China trade disputes, the war in Ukraine, and the war in the Middle East.
According to JP Morgan:
“We think [the price of gold will go higher]…particularly now with…ongoing trade and tariff risks. We remain deeply convinced of a continued structural bull case for gold.”
Several commentaries also emphasize that the current US-China trade truce may be temporary.
As Matt Simpson, a seasoned analyst at City Firm, says:
“We know that US and Chinese negotiators have agreed on a ‘framework,’ but until Trump or Xi approves them, uncertainty lingers. And that uncertainty is supporting gold.”
Factor #3: Central bank demand
If central banks keep buying gold at their current pace, 2025 will mark the fourth straight year in which global central banks have purchased more than 1,000 tons of gold. That’s more than double the annual average of 450 tons recorded between 2010 and 2021.
This sustained level of buying has become one of the most reliable forces underpinning gold’s long-term momentum. Unlike speculative investors, central banks tend to accumulate quietly and hold through volatility, creating a natural price floor that helps stabilize the market even during corrections.
And according to the Central Bank Gold Reserves Survey 2025 by the World Gold Council, “95% [of the respondents) believe that global central bank gold reserves will increase over the next 12 months, [and] 43% of respondents believe that their own gold reserves will also increase over the same period.”
“The long-run bull story for gold,” says Lina Thomas, Goldman Sachs Research, “is that central banks are buying large amounts of it. We expect that to continue for at least another three years.”
So, the question now is:
How far will the gold rally go?
Bullish forecasts are piling in from the world’s biggest banks
Goldman Sachs now expects gold to hit $3,880 per ounce by year’s end. Bank of America projects a move to $4,000. And JP Morgan believes prices could reach as high as $6,000 in the near future.
For investors who’ve been waiting on the sidelines, this moment represents a window of opportunity. If history is any guide, and if these top banks are right, what we’ve seen so far may only be the beginning of a much broader move.
Please don’t hesitate to reach out to us with any questions you may have.
May you be safe and well during these uncertain times.
Todd Sawyer, Director of Client Education
Colonial Metals Group