RBC Capital Markets Predicts Steady Growth for Gold in 2025

Gold Prices Set for Steady Growth in 2025

Analysts at RBC Capital Markets have recently indicated that gold prices are likely to experience moderate gains in 2025. This prediction stems from ongoing uncertainties surrounding economic growth and rising inflation risks, which are bolstering demand among central banks and investors alike.

Influence of Federal Reserve Policies

The previous year for gold was quite volatile, primarily influenced by cautious expectations regarding Federal Reserve interest rate adjustments. This caution resulted in a rise in both nominal and real bond yields, impacting overall market dynamics.

Potential Economic Changes Ahead

In the United States, political shifts have also played a significant role in shaping economic forecasts. The incoming administration has suggested plans for comprehensive import tariffs and increased protectionist trade policies. Such measures have economists speculating on the likelihood of increased inflation, which could subsequently affect monetary policy decisions by the Federal Reserve. After three cuts in interest rates during the past year, the Fed now anticipates only two further reductions in 2025.

The Hedge against Inflation

Gold has traditionally served as a hedge against inflation, but the existing higher interest rates have the potential to bolster the US dollar, thereby diminishing the attractiveness of gold as a non-yielding asset. Despite these challenges, there are optimistic views regarding gold's future. In 2024, gold prices soared by approximately 27%, a remarkable performance that outstripped both broader equities and commodities, as noted by RBC's lead analyst, Josh Wolfson.

Performance Trends

For 2024, the average gold price climbed to $2,390 per troy ounce, marking a notable ninth consecutive yearly increase. RBC analysts believe this momentum may continue into 2025, predicting that gold will benefit from the persistent appetites of investors driven by various factors including:

Investment Factors for 2025

1. Economic uncertainties surrounding global growth and inflation risks.

2. Geopolitical tensions fuelled by deglobalization and protectionist trade policies.

3. Continually high levels of global sovereign debt.

These elements underscore a cautiously optimistic outlook for gold. The analysts forecast an average price of around $2,823 per ounce for 2025 and $2,873 per ounce in 2026. However, they also caution that prices may retreat slightly following these peaks, an adjustment that reflects the cyclical nature of commodities.

Conclusion

The outlook for gold remains robust as various economic indicators suggest a continued interest in the precious metal. The interplay of inflationary pressures, policy decisions, and geopolitical factors are all contributing to a favorable environment for gold investments over the next few years.

Frequently Asked Questions

What are the key factors influencing gold prices in 2025?

Gold prices are influenced by economic uncertainties, inflation risks, geopolitical tensions, and global sovereign debt levels.

How did gold perform in 2024?

Gold prices rose by approximately 27%, reaching an average of $2,390 per troy ounce, marking the ninth consecutive year of growth.

What is RBC’s price forecast for gold in 2025?

RBC predicts that gold will average around $2,823 per ounce in 2025, with a possible increase to $2,873 per ounce in 2026.

How do interest rates affect gold prices?

Higher interest rates can strengthen the US dollar and diminish the appeal of gold as a non-yielding asset, leading to fluctuations in gold prices.

What recent political changes could impact gold investments?

Changes such as proposed import tariffs and protectionist trade policies could potentially influence inflation and, consequently, gold prices.

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