Gold Rally Surges in 2025 But Turbulent H2 Could Derail Gains

Gems News: Gold’s spectacular rally in the first half of 2025 has sent shockwaves across global financial markets, surging by an impressive 26% in US dollar terms and outperforming every other major asset class. According to the World Gold Council’s highly anticipated Gold Mid-Year Outlook 2025, the precious metal shattered expectations and set 26 new all-time highs during H1, buoyed by a perfect storm of macroeconomic forces.

Title: World Gold Council warns of uncertainty in gold prices for H2 of 2025
Image Credit: World Gold Council

A weaker US dollar, steady interest rates, and intensifying geopolitical tensions drove investors to seek safety in gold. This Gems News report finds that demand spiked across various platforms, including gold-backed ETFs, OTC trades, and global exchanges. Central banks also played a pivotal role, ramping up purchases and reinforcing bullish sentiment. Notably, global holdings in gold ETFs surged by 41%, reaching a record $383 billion, while daily trading volumes hit an unprecedented $329 billion. However, soaring prices have begun to strain retail demand, and analysts warn that recycled gold flows may start to rise.

Despite this historic momentum, the World Gold Council has issued a cautious outlook for the second half of 2025. Using its Gold Valuation Framework, the Council presented three potential trajectories. In a base scenario, gold could see modest gains of up to 5% if interest rate cuts proceed gradually amid economic uncertainty. A more pessimistic global backdrop—marked by recession or stagflation—could boost gold another 10% to 15%. Conversely, if geopolitical tensions ease and economic recovery accelerates, the metal may retrace by as much as 17%, pressured by rising bond yields and reduced hedging demand.

The broader question now confronting investors is whether gold has already peaked or if there’s more room to run. The answer will hinge on how central banks respond to persistent inflation, how global conflicts evolve, and whether investor risk appetite shifts in response to shifting macro signals.

With fundamentals still strong but the path ahead clouded by uncertainty, market watchers are bracing for a volatile ride. Gold’s performance in the latter half of the year may be less about momentum and more about navigating a delicate balancing act between inflation, interest rates, and global security threats. A sustained flight to safety could reignite the rally, but any shift toward economic optimism could unravel recent gains.

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