The latest report from the World Gold Council (WGC) shows that although global interest rates are expected to continue to decline in 2025, creating favorable conditions for gold, the outlook for entering the new year is somewhat uncertain.

In its "2025 Outlook" report released on Thursday, WGC pointed out that as uncertainty dominates investor sentiment, the gold market will face two completely different situations next year. However, if the current market conditions continue, its basic situation is expected to have a relatively neutral price trend.

Amidst the unstable outlook for gold prices, they have rebounded to $2700 per ounce and are expected to rise nearly 30% by the end of the year, marking the largest increase in decades. Compared to the same period last year, there has been a slight change in popularity around gold. Entering 2024, investors are quite optimistic that gold will perform well as the market expects the Federal Reserve to significantly cut interest rates.

Despite holding a hawkish stance for a long time, gold prices have continuously hit historic highs throughout the year due to central bank demand dominating the market. At the same time, Asian consumer demand played an important supporting role in the first half of this year. In the summer, as Asian demand cooled, Western investors entered the market, providing new support at record highs as the Federal Reserve launched its long-awaited easing cycle.

Looking ahead, WGC analysts say their models show that as investors measure the health of the global economy, the gold market will become more nuanced.

The consensus in the market on key macro variables such as GDP, yield, and inflation (if measured at surface value) suggests that gold will experience positive but much milder growth in 2025. The upward trend may come from stronger than expected central bank demand or from rapidly deteriorating financial conditions leading to capital flowing into high-quality safe assets. Conversely, a reversal in monetary policy leading to higher interest rates may pose challenges

The WGC emphasizes that a major risk for gold remains the uncertain economic policies of President elect Trump, including his proposed tariffs to support domestic manufacturing, which could push the global economy towards increased trade tensions.

Many economists point out that raising trade tariffs may push up already high inflation, which could affect the current monetary policy stance of the Federal Reserve. The market has begun to lower expectations for a rate cut in 2025. Bank of America is expected to cut interest rates only twice next year, while Wells Fargo is expected to only cut interest rates once.

Analysts said, "In this context, the actions of the Federal Reserve and the direction of the US dollar will continue to be important driving forces for gold. However, as the past few years have shown, these two are not the only factors determining gold's performance. Instead, we rely on a stronger framework that allows us to capture contributions from all aspects of gold supply and demand

On a positive note, WGC suggests that investors should continue to closely monitor the interests of Asian consumers. With the Federal Reserve maintaining its restrictive monetary policy in the first half of 2024, the interest of Asian consumers has helped drive gold prices to historic highs.

Analysts said, "Asian investors have contributed to the performance of gold this year, especially in the first half of the year, while Indian demand has benefited from the reduction of import tariffs in the second half of the year. However, the risk of trade tensions is increasing. Consumer demand in major Asian countries is likely to depend on the health of economic growth, whether through normal means or government stimulus. Although the same factors affecting investment demand in 2024 still exist, gold may face competition from stocks and real estate

Finally, the biggest source of support for gold prices remains central bank demand. WGC expects central banks around the world to continue purchasing gold, even if the pace of purchases has slowed down compared to recent years.

They said, "The central bank's gold purchases are policy driven and therefore difficult to predict, but our investigation and analysis indicate that the current trend will continue. In our view, demand of over 500 tons (roughly a long-term trend) still has a net positive impact on performance. We believe that central bank demand will exceed this number by 2025.