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Gold Investors Remain Optimistic for 2025 Amid Fears of Trump-Driven Market Volatility

Gold Investors
Gold Bounces

Investors remain optimistic about gold’s future prospects after a stellar performance in 2024, marking its largest annual gain since 2010. The precious metal surged by 27% last year, reaching nearly $2,800 per ounce, driven by several key factors.

The rally was primarily fueled by significant gold purchases from central banks, particularly in China and other emerging markets. Additionally, the Federal Reserve’s accommodative monetary policy made gold, which does not yield interest, a more attractive investment. Geopolitical tensions, including ongoing conflicts in Ukraine and the Middle East, further solidified gold’s status as a safe haven.

These drivers are expected to persist into 2025, with investors continuing to see gold as a valuable asset for wealth preservation, especially in light of uncertainties surrounding U.S. trade policies and the global economy. Greg Sharenow, a portfolio manager at Pacific Investment Management Co., believes that central banks and high-net-worth individuals will keep gold in their portfolios as part of investment diversification.

At the extreme end, U.S. hedge fund Quantix Commodities has allocated 30% of its holdings to gold, nearly double the metal’s weight in the Bloomberg Commodity Index. Senior executive Matt Schwab has stated that the fund plans to maintain this position throughout 2025, with a target of $3,000 per ounce for gold.

Wall Street banks, including Bank of America and JPMorgan Chase, are also bullish on gold, forecasting it could reach $3,000 by the end of the year. UBS AG expects a slightly lower target of $2,900. At the start of January, gold was trading above $2,600 an ounce.

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Although gold experienced some declines following the U.S. election in November, driven by a rally in the dollar, stock markets, and Bitcoin, the longer-term outlook remains positive. The prospect of new tariffs under President Trump’s administration could lead to trade tensions, inflationary pressures, and slower economic growth, all of which could support gold’s price.

According to Darwei Kung, head of commodities at DWS Group, a deterioration in trade relations would likely hurt equity markets and make gold a valuable hedge. He predicts gold will reach $2,800 by the end of 2025.

For global markets, potential trade wars with the U.S. could prompt central banks to accelerate easing measures, further boosting gold. Aline Carnizelo of Swiss firm Frontier Commodities also expects gold prices to rise above $2,800 this year.

The ongoing rise in U.S. deficit spending and growing debt levels also contribute to the appeal of gold. With the U.S. national debt now exceeding $28 trillion, concerns about the government’s ability to manage this debt could lead some investors to move away from Treasuries in favor of gold.

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Patrick Fruzzetti, portfolio manager at Rose Advisors, noted that the current fiscal situation under the Trump administration is starkly different from his first term due to the ballooning deficit. Despite promises to tackle the deficit, Fruzzetti remains committed to his gold position, reflecting broader investor sentiment.

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