Gold investors stay bullish for 2025 on expected Trump turbulence

Money managers are seeing plenty of reasons to remain bullish on gold, following a stellar 2024 that saw the precious metal post its biggest annual gain since 2010.

Bullion surged 27% last year, hitting record highs as it soared to almost $2,800 an ounce. Three main factors fueled the rally: large purchases by central banks, notably those in China and other emerging markets; the Federal Reserve’s monetary easing, which makes non-yielding gold more appealing; and the precious metal’s historical role as a safe haven amid ongoing geopolitical tensions, including wars in Ukraine and the Middle East.

Those drivers remain more or less intact going into 2025. But investors are also braced for Donald Trump’s second term and the new president’s potential impact on trade flows, inflation and the global economy. That prospect continues to spur gold buying as a way to protect wealth and hedge against potential negative shocks.

Investment diversification through bullion purchases is “a trend that will persist,” said Greg Sharenow, a portfolio manager at Pacific Investment Management Co.. “We would expect that central banks and high net worth families will continue to find gold attractive.”

At one extreme, US hedge fund Quantix Commodities has 30% of its holdings in gold, almost double the metal’s weighting in the Bloomberg Commodity Index. Quantix plans to maintain its overweight position through this year, said senior executive Matt Schwab, who expects gold to rise to $3,000 in 2025.

Sell-side strategists at Wall Street banks are also bullish. Bank of America Corp. and JPMorgan Chase & Co. forecast bullion will reach $3,000 by the end of this year, while UBS Group AG sees $2,900. Goldman Sachs Group Inc. pared back its bullish forecast on Monday, but still sees prices hitting $3,000 by mid-2026.

To be sure, gold has slipped since the Nov. 5 US election. The metal lost out during a rally in the dollar, stock market and Bitcoin amid market euphoria over Trump’s victory. Spot gold traded around $2,643 an ounce on Monday. 

But in the longer term, the likelihood of new tariffs is seen accelerating trade tensions and risking slower economic growth. Economists and analysts view Trump’s proposed measures as fueling inflation, complicating the Fed’s path to lower interest rates this year.

After delivering the expected quarter-point cut at their final meeting of 2024, Fed officials on Dec. 18 signaled just two rate cuts for 2025 and greater caution over how quickly they can continue reducing borrowing costs. 

“Should trade relations deteriorate with new Trump policy, we may see the equity market react negatively,” said Darwei Kung, head of commodities at DWS Group, who sees bullion rising to $2,800 by year end. “Gold would be a good asset to hold to hedge against such risk.”

For the rest of the world, possible trade wars with the US may prompt central bankers to quicken the pace of easing. That’s a scenario that would bolster gold’s performance, according to Aline Carnizelo, managing partner at Swiss firm Frontier Commodities, who sees prices trading above $2,800 this year.

Patrick Fruzzetti, portfolio manager at Rose Advisors in New York, said the big difference between now and when Trump was in office the first time is the level of deficit spending. The US debt load has risen to about $28 trillion from less than $17 trillion at the end of 2019, and the federal deficit is projected to exceed 6% of gross domestic product in 2025, according to Congressional Budget Office.

Concerns about the US government’s ability to pay back the debt could deter some investors from putting money into Treasuries, said Jeff Muhlenkamp, who allocates about 12% of his namesake fund indirectly to gold.

“Actions speak louder than words,” Fruzzetti said of the incoming administration’s pledge to get a grip on the federal deficit. “Until they can show me different, I am not downsizing my gold position.”