Gold Up 22 Per Cent So Far In 2025 – Is The Rally Expected To Continue?

Gold has been on a steady rise amid geopolitical tensions in the Middle East, an escalating trade war between China and the US and a declining US dollar index. MCX Gold June Futures contract on Friday, April 11 touched a new record high of Rs 93,940 per 10 grams.

In the international market, COMEX Gold hit a record high of $3,237 per ounce. Gold prices have rallied over 22 per cent on a year-to-date basis.

Economic Uncertainty Triggered By Trump Tariffs

Trump’s tariffs have rattled the financial markets across the global economy, raising concerns about inflation in the US and a global recession. Although most tariffs are now on hold, Trump has increased tariffs on Chinese goods to 145 per cent. In response, China raised its tariffs on US products to 125 per cent. This economic uncertainty sparked by the ongoing trade battle drove the demand for the safe-haven metal.

Declining US Dollar Index

The US dollar is under pressure. It has declined sharply against its peers amid Trump's protectionist trade policies. The US Dollar index has slipped below 100 to a three-year low. Three months ago, it used to quote above the 109 level. The fall of the US Dollar makes gold cheaper for overseas buyers, thus boosting the yellow metal's attractiveness.

Central Banks' Increasing Appetite For Gold

According to the World Gold Council, central banks across the world bought 1,045 tonnes of gold in 2024. This was the third consecutive year when central banks have bought over 1,000 tonnes of gold per year. The National Bank of Poland has bought the most gold in 2024 - over 90 tonnes. However, the major demand was seen from a broad range of emerging market banks, the World Gold Council said.

The Question Around Bond’s Reliability As Safe Haven

Bonds are witnessing sell-offs in the wake of Trump's obsession with tariffs. US Treasury bonds are considered one of the safest places for investors to park their money. The benchmark US 10-year bond yield jumped by more than 600 basis points just last week near its six-week high of 4.5 per cent. Trump's push for tariffs had led to a crash in the US Treasury market, sending bond prices lower and yields sharply higher. However, after Trump announced the 90-day tariff pause on all trading partners but China, stability in bond markets came. However, this volatility in bond prices led many to question its reliability as a traditional safe haven in uncertain times like these. As a result, investors shifted to gold.

Expectations Of A Dovish Federal Reserve

Kaynat Chainwala, AVP-Commodity Research at Kotak Securities, explained that softer-than-expected US inflation data combined with an increase in jobless claims has strengthened expectations of a more dovish stance from the Federal Reserve. Following the CPI report, the probability of a rate cut at the upcoming June 17–18 FOMC meeting rose to 87 per cent, up from 74 per cent the previous day, she said.

Where Is Gold Headed Now?

According to Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, the current momentum favours buyers, and gold is now eyeing the resistance zone between Rs 94,500 and Rs 95,000. On the downside, Trivedi said, Rs 92,000 serves as an important support level. He added that ongoing tariff dispute developments and investor positioning ahead of key global economic data are expected to influence gold’s price movements.

According to brokerage firm UBS, gold’s rally is expected to continue into next year, with prices likely to settle at higher levels over time. Analysts at UBS have forecasted gold to hit $3,500 per ounce this year. Last week, Deutsche Bank also increased its gold price estimates for 2025 and 2026 to $3,139 and $3,700 per ounce, respectively.