Market Outlook

With inflation remaining above central bank targets in several major economies while rate cuts have begun, real rates are compressing. Historically, declining or negative real rates reduce the opportunity cost of holding gold and have been among the strongest predictors of gold price appreciation.

The dollar has weakened from its 2022 peaks but remains elevated by historical standards. Continued fiscal deficits, de-dollarization trends among BRICS nations, and potential rate divergence between the Fed and other central banks could pressure the dollar further — a tailwind for gold priced in USD.

Central banks purchased over 1,000 tonnes of gold in both 2023 and 2024, led by China, Poland, India, and Turkey. This structural buying — driven by reserve diversification away from US Treasuries — has fundamentally altered the supply-demand equation and shows no signs of abating.

Ongoing conflicts, trade tensions, sanctions regimes, and great-power competition continue to drive safe-haven demand. The weaponization of the financial system (freezing of Russian reserves) has accelerated sovereign gold accumulation as nations seek sanctions-proof reserves.

While headline inflation has moderated from 2022 peaks, structural factors — including energy transition costs, supply chain reshoring, fiscal expansion, and demographic pressures — suggest inflation may settle above pre-pandemic levels. Gold has historically performed well during persistent moderate inflation.

Gold mine production has plateaued near 3,600 tonnes annually, with declining ore grades, longer permitting timelines, and rising extraction costs constraining new supply. Recycled gold adds approximately 1,200 tonnes per year but is price-sensitive. Limited supply growth supports prices when demand is strong.