The start of 2025 has been pretty good for precious metals, with gold keeping its star status. Commodities in general, in fact, have been outperforming. Which kind of suggests where a good deal of the strength for gold is coming from: China. But there are other factors as well, which have left many analysts believing that the year is shaping up to be positive for precious metals, including silver, Gold(XAUUSD) and platinum.
Prices in metals have had a double surge in just two weeks. The first was propelled by expectations that stimulus from China would keep up demand. China is one of the largest buyers of metals in general, and the PBOC of late has been stocking up on gold. Then just this week, US inflation indicators showed that price growth might be easing in the US faster than anticipated. That would leave the Fed potentially poised to keep easing through the course of the year. And lower rates traditionally means higher prices for gold.
What the Experts Are Saying
In the wake of US inflation figures, where the core rate unexpectedly fell against anticipation that it would remain the same, Wells Fargo issued a note to clients saying they expected commodities in general to outperform this year. The analyst at the bank suggested that the roller coaster of prices last year as markets were whipsawed by hope and disappointment over Chinese stimulus, has left supply not keeping up with demand.
The analysts suggested gold could rise by as much as 10% through the course of the year, issuing a price target of $2,700-$2,800 for the next twelve months. Other analysts have been more upbeat, suggesting that gold could break the $3,000 barrier. The recurring theme from these predictions is the expectation that bond yields will decline through the course of the year, even if the drop in interest rates won’t be as smooth as some traders might have hoped.
How Right Are They?
While there have been several analysts predicting rates rising, not all of them are convinced. And even the Gold(XAUUSD) bulls admit there are scenarios where the price could fall. One of the risk factors is a resurgence in inflation in the US, either driven by improved expectations from the economy or from the impact of tariffs slowing global trade. That would keep interest rates elevated, putting pressure on gold.
Another is a “good news is bad news” scenario, where the Chinese economy is seen improving and thus alleviating the pressure on Beijing authorities to issue stimulus that would otherwise support gold prices.
And the Data So Far?
Early on Friday, Chinese GDP was reported growing at 5.4% last year, above the 5.0% expected, as the economy accelerated into the final quarter of 2024. Economists are unsure if that growth will persist, however, and expectations remain high for future stimulus measures.
The next event that could potentially shake up the price of Gold(XAUUSD) is the inauguration of President Donald Trump’s second term. He’s expected to issue a flurry of executive orders (as many as 100, a record) on the day or in the days immediately after. Depending on the content, that could shake up the markets. Additionally, the Fed will be in its pre-rate decision blackout period, so it will be harder for the markets to gauge the impact on monetary policy, leading to the potential for higher volatility in the coming days.
