Gold Price Forecast: XAU/USD remains near $4,300 with strongest annual gain
- Gold price fell after the December FOMC Minutes revealed a deeply divided Federal Reserve committee.
- The yellow metal is on course for its strongest annual gain in 2025, rising more than 64%.
- Safe-haven demand for Gold could rise amid escalating geopolitical tensions.
Gold price (XAU/USD) edges lower on the final trading day of 2025, trading near $4,310 per troy ounce during the European hours on Wednesday. The non-interest-bearing precious metals, including Gold lose ground as the Federal Open Market Committee (FOMC) December Meeting Minutes, released on Tuesday, indicated a deeply divided committee.
Some Federal Reserve (Fed) officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions this year. However, some policymakers judged that it would likely be appropriate to stand on further rate cuts if inflation declined over time.
Gold price is on track for its strongest annual gain in 2025, up more than 64%, with the rally accelerating in late April after US President Donald Trump’s global tariff rollout. Momentum has been further supported by strong central bank buying and rising holdings in Gold-backed ETFs.
The safe-haven demand for Gold could increase over the geopolitical tensions as investors reassess fading hopes of a Russia-Ukraine peace deal following alleged strikes on Russian President Vladimir Putin’s residence. Russia said it would harden its stance in peace talks after accusing Kyiv of the attack, an allegation Kyiv rejected as baseless and aimed at derailing negotiations.
In the Middle East, Saudi air strikes in Yemen and Iran’s declaration of a “full-scale war” with the United States (US), Europe, and Israel have heightened fears of wider instability, while Trump warned of further strikes if Iran resumes rebuilding its nuclear programme.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.