Gold prices are expected to show explosive growth in 2025, with an annual increase of over 60%, marking one of the largest annual increases since 1979.
London spot gold surged from $2638 per ounce at the beginning of the year to about $4329 per ounce in December, with an annual increase of about 64%, outperforming major global stock indices.
In October, it briefly reached a historical high of $4381, and thereafter oscillated at high levels in the $4000–$4300 range.
What is driving the explosive growth in 2025?
1. Central banks worldwide continue to purchase gold. Official reserve demand constitutes an 'anchor point', with central banks in China, Poland, and others continuing to increase their holdings.
2. Major central banks cut interest rates. The Federal Reserve, European Central Bank, and Bank of Japan maintain or shift towards easing, reducing the opportunity cost of holding gold as real interest rates decline.
3. Inflation and a weakening dollar. Concerns about the U.S. fiscal deficit and "de-dollarization" are rising, reducing the marginal credit of the dollar and enhancing the value preservation appeal of gold.
4. Geopolitical risks. The Ukraine war, the Middle East situation, and trade frictions continue, strengthening the demand for safe havens.
5. Expansion of investment demand. The inflow into gold ETFs is accelerating, with new buyers such as stablecoin issuers and corporate finance departments entering the market, exacerbating the imbalance between supply and demand for physical gold. Throughout the year, the inflow of ETF and off-market funds continues, in resonance with central bank gold purchases, driving prices up rapidly.
6. Limited growth in mineral supply. The World Gold Council predicts that global gold production will only increase by about 1% year-on-year in 2025, far below the increase in investment demand.
J.P. Morgan, Bank of America, Metals Focus, and others believe that gold prices are expected to challenge $5,000/ounce in 2026, provided that the Federal Reserve continues to cut interest rates and geopolitical risks do not diminish.
In 2025, gold achieved historic gains under the multiple resonance of central bank gold purchases, interest rate cut expectations, inflation concerns, and geopolitical risks, becoming the most outstanding global asset class for the year.
Led by gold, silver will experience a "doubling" surge in 2025, with a maximum annual increase of about 120%. London spot silver soared from about $32/ounce at the beginning of the year to a peak of $66.87/ounce in December, with an annual increase of about 120%, setting the best annual record since 1982.
However, there is no silver ETF, but the Guotou Silver LOF161226 has arbitrage opportunities. Today's premium rate in the market is about 30%, and each account is limited to purchasing 500. Just a single transaction can yield a decent profit, quite a good small gain, not taking advantage of it would be a waste. Market subscriptions settle T+2, and can be sold. I just made a profit, enough for a cup of milk tea.
The volatility of silver prices is about 2–2.5 times that of gold, with extreme fluctuations of ±5% in a single day occurring between October and December, earning it the nickname "devil's metal."
Also, the Miao women in Guizhou are not keen on gold; they only love silver. When we got married, silver was only 240 per gram, and now the recycling price has reached over 700 per gram, tripling in value. However, silver jewelry, like gold jewelry, has about a 20% craftsmanship fee, so trading silver requires buying and selling physical silver, which incurs too much transaction cost. It's better to engage in futures or ETFs, where transaction costs are much lower. Silver is expected to rise further, so I will have my wife sell the unused silver jewelry to cash in some private money.
