Global sales of gold are poised to have its best annual performance in over a decade, reaching 40 new historical highs and up 28% year-to-date in 2024, will continue to have a positive but much more modest growth for gold in 2025, says the World Gold Council (WGC).

The gold price has increased by more than 28% y-t-d in US dollars, trading 22% higher on average this year than during 2023. Gold has outperformed most major asset classes this year due to investment demand, especially through over-the-counter transactions and was supported by an undercurrent of geopolitical risk and volatility in many regional financial markets. Central banks continued to add gold to reserves, which picked up speed in early October. And, for most of the third quarter, Western investors flocked back to gold as central banks started cutting interest rates, observes the UK-based World Gold Council, which tracks gold sales globally at the wholesale level.

“Gold is having a record-breaking year due to a confluence of factors, driving the gold price and demand to record levels. And while the current consensus on global economic performance suggests that gold could move sideways, the uncertainty surrounding the geopolitical landscape could provide a springboard for gold next year,” says Juan Carlos Artigas, global head of Research, World Gold Council.

He says that the year 2025 is set to be marked by evolving fiscal and economic policies, which may result in shifting global dynamics. For gold, 2025 will be a tale of two halves – as there can be more risk-on appetite as people wait for strategic and tactical drivers to unravel, leading to more clarity and direction for gold’s performance later in the year. If there is a significant drop in interest rates or a marked increase in market volatility, it may further fuel investor interest. Global central bank demand and Asian markets are likely to continue buying of gold, says the expert.

The WCG says that demand from China and India (the gold’s largest markets) will have a big influence, as Asia makes up more than 60% of annual demand (excluding central banks). This year, Asian investors added to gold’s performance, particularly during the first half, while Indian demand benefitted from the reduction in import duty during the second half. However, the risk of trade wars looms large, and Chinese consumer demand will likely depend on the health of economic growth – whether through normal means or government stimuli. Additionally, while the same factors that influenced investment demand in 2024 are still present, gold may face competition from stocks and real estate, the WGC adds.

It predicts that gold is likely to remain rangebound if existing market expectations are correct. However, a combination of higher rates and lower economic growth could negatively affect investors and consumers. This could be particularly evident in Asia. Conversely, significantly lower interest rates or a deterioration in geopolitics or financial market conditions will improve gold’s performance. Gold’s final price performance will depend on the interaction of gold’s four key drivers: economic expansion, risk, opportunity cost, and momentum, the WGC states.