HSBC: Gold Will Continue to Be Well Supported in 2025

HSBC reported that despite the recent pullback, the gold price per ounce has maintained its historical high level of $2,790 reached on October 31, 2024. The bank anticipates that gold prices will continue to be well-supported in 2025 due to financial, economic, geopolitical, and trade risks. HSBC raised its average price forecast for gold per ounce in 2025 from $2,625 to $2,687.

It noted that the rally in gold in 2024 was partly fueled by a mixture of safe-haven and hedge fund purchases prompted by ongoing expectations of Fed and other central bank interest rate cuts, along with economic uncertainty. "However, as the monetary expansion cycle matures, further interest rate cuts may become less supportive. Increasing fiscal deficits are also driving demand for gold. ETFs remain liquid, but OTC and physical purchases continue to be strong. Long positions are high on the CME, but subject to liquidation. Sentiment remains bullish, yet overall resistance and high yields are limiting rallies," it stated.

HSBC highlighted that commercial and/or geopolitical risks could be primary supportive factors for gold this year, suggesting that “Central bank demand is likely to remain high, supported by geopolitical risks and dollar diversification, but it is expected to be below the peaks of 2022-23. Official sector purchases may moderate during rallies above $2,800 per ounce and could increase if gold falls below $2,400 per ounce."

It added, "High prices encourage more supply and reduce physical demand. Elevated prices significantly erode jewelry and coin demand in price-sensitive emerging and some OECD markets. Demand for bars is also expected to decline. Weak physical demand will leave more metal to be absorbed by investors."