Key 2025 Trends Shaping the Gold Market

Amid ongoing global economic and geopolitical uncertainties, gold has remained a focal point for investors seeking stability. At the 34th annual BMO Global Metals, Mining & Critical Minerals conference in Hollywood, Florida, BMO Commodities Analyst George Heppel discussed the outlook for the precious metal with Joseph Cavatoni, North American Senior Market Strategist for the World Gold Council (WGC).  

Geopolitical risk is expected to be a strong tailwind for gold in 2025, and that could compel central banks around the world to increase their gold reserves, explained Cavatoni. More specifically, it’s Europe and the emerging markets that are driving purchases.  

Cavatoni expects to see the investment community follow suit, particularly as the risks on the horizon persist, including continued challenges in Ukraine. “We’re not going to know what's going to happen next week, let alone tomorrow, and it’s going to stay volatile.”  

In fact, the sector faces some headwinds, including how investors might use the yellow metal in their portfolio. Cavatoni is monitoring to see if gold might shift from being seen primarily as a hedge against volatility to an asset that can grow wealth in a portfolio. “When you’re looking at yield levels, investors are still finding some short-term assets appealing, which leaves gold only in the risk-mitigating category,” he said. “We want investors to see the benefits of having gold beyond being just a shock absorber.”  

One of the factors that could support demand is the digitization of the gold market. This has been a priority for the WGC, with the 2022 launch of its Gold247™ project, which aims to enable investors to trade the precious metal in a more efficient, transparent and fungible way. 

The goal is to gain more trust within gold supply chains and make these assets traceable, especially as investors seek ways to mitigate risks associated with illegal mining. The WGC is working on a project with major industry players, using blockchain to map gold from mine to vault. The Gold Bar Integrity (GBI) program will prove the provenance and authenticity of gold bars, starting with the 400oz bar market but expanding in time to a broader range of assets. This ‘database’ is an essential first step in digitalizing the gold market.  

The effort to digitize gold was partially started in reaction to the Basel banking regulations, which increased the cost to banks that hold gold on their balance sheets. The challenge is that Basel rules do not consider gold to be a high-quality liquid asset due to the lack of trading data. “The more we can do to put all that information in a database, which leads to digitization, the better the outcome for gold,” Cavatoni said. 

In addition to China’s central bank purchases, another major development is the Chinese insurance sector’s pilot program, allowing these companies to invest directly in gold for the first time. The idea is to help the insurance sector hedge risks in their portfolios. With China’s real estate sector facing challenges and with limited investment options available to domestic investors, gold is increasingly being viewed as a viable alternative, explained Cavatoni. 

This initiative signals a potential new pool of capital entering the market. China has long seen a strong uptake for gold jewelry as a way to store wealth, but with insurance companies buying this metal, demand for the commodity could rise significantly. 

“This initiative signals a potential new pool of capital entering the market that has no access to gold today in the investment context,” he said.  

Overall, uncertainty, inflation concerns, and shifts in investor sentiment will continue to shape the market for gold. Between those factors and a resurgence of demand from Europe combined with China allowing its insurance sector to dip its toe into the sector, gold appears well-positioned to remain a key asset in diversified portfolios.