Gold has kept on
rising almost uninterruptedly for most of 2025, recording a series of new
all-time highs. Since October 2022, the metal’s price has almost doubled,
having risen by more than 25% in 2025 alone, hitting a fresh all-time high of
$3,500 per ounce on April 22. A $4,000 price level, once dismissed as fantasy,
is now openly being discussed on trading floors across the globe. Octa Broker
examines the forces behind gold’s remarkable rally — and what might come next.
Geopolitical Tensions as
the Main Catalyst
The global
environment in 2025 is anything but peaceful. The wars in the Middle East and
Eastern Europe remain, and their long-term resolution still seems to be out of
reach. The U.S.–China relations have taken a sharp downward turn. The latest
installment of hostilities is being acted out in tariffs: the Trump
administration has resumed a trade war footing, with China retaliating by
raising tariffs on U.S. goods to 125% from 84%. Recently, the USA admitted
that the tariffs for China could be increased up to 245%. This intensifying global
uncertainty has propelled investors toward safe-haven assets, and none are more
tried-and-tested than gold. As global trade frays and economic growth outlooks
dim, gold’s role as a hedge becomes more pronounced.
Monetary Policy
Expectations and Rate Cut Bets
Historically, gold
tends to perform better when the interest rates are low. The current U.S.
monetary policy outlook suggests a favourable environment for the precious
metal. In response to weakening economic signals, the Federal Reserve (Fed) is
widely expected to cut interest rates at least twice in 2025. The latest Labour
Department data revealed a surprise drop in U.S. consumer prices in March,
bolstering expectations of a looser policy stance by mid-year. Market
participants now factor in a roughly 30% chance of a full percentage point cut
by December.
However, with
inflation potentially resurging due to tariffs, the Fed could be forced to
reverse course. Such a move might derail gold’s momentum. Still, for now, lower
rates make non-yielding assets like gold more attractive, creating the
potential for further price gains.
Weak Dollar Boosts Gold’s
Appeal
The U.S. dollar index
recently recorded its sharpest decline since 2022, hitting new
yearly lows. As Kar Yong Ang, a financial market analyst at Octa Broker,
explains: ‘A weaker greenback typically
supports gold by making it more affordable for holders of other currencies.
This trend, together with the increasing uncertainty, has encouraged strong
demand, further fuelling the rally’. Indeed, the increasing demand has been
evident since the beginning of the year. In the middle of April, gold fund net
inflows hit a record $80 billion year-to-date, according to BofA Global Research.
Central Bank Buying and
De-Dollarisation
Another bullish factor
for gold is the rise in structural physical demand — especially, when it comes
to global central banks that increase their gold reserves at an aggressive
pace. People’s Bank of China raised its gold holdings to a record level in
Q1 2025, underscoring the metal’s strategic importance. This structural demand
aligns with the broader BRICS-led push for de-dollarisation. Diversifying away
from U.S. Treasuries and the dollar, several countries are turning to gold as a
reliable store of value — bolstering long-term demand fundamentals.
ETF Flows Reflect Retail
and Institutional Demand
The growing optimism
among investors regarding gold is also evident in exchange-traded funds (ETFs).
Gold-backed ETFs experienced significant inflows in March 2025,
particularly in North America. These flows indicate robust interest from both
retail investors and institutional players, further tightening the market.
Key Risks to the $4,000 Scenario
Despite the underlying bullish environment,
gold may fall short of the $4,000 target and, instead, experience a significant
downward correction due to several factors:
●
Inflation Surprise and Rate Reversal. If
tariffs and supply disruptions reignite inflation, central banks may be forced
to abandon dovish policies. A Fed reversal to a tightening bias could
strengthen the dollar and exert a downward pressure on gold prices —
potentially disrupting the bullish narrative.
●
Geopolitical Stabilisation. A de-escalation of
global tensions, particularly between the U.S. and China or in Eastern Europe,
could sharply reduce safe-haven demand. While this is not the base case for
2025, it remains a wildcard risk that traders must consider. Indeed, XAUUSD has
already pulled back from its recent highs after the U.S. President Donald Trump
hinted at lower tariffs for China.
●
Overbought Technical Conditions. Gold’s sharp
rally raises the likelihood of corrective pullbacks. If momentum slows,
profit-taking could spark a swift and dramatic sell-off. As with any parabolic
move, volatility is inevitable: the price tends to experience short-term
downtrends before new all-time-highs (ATH). Traders with short-term strategies
should beware of such price drops and practice risk management: avoid large
trading sums, apply stop-loss positions, and diversify their portfolio.
Is $4,000 a Fantasy or a Forecast?
A convergence of
macroeconomic, structural, and technical factors is pushing gold into uncharted
territory. With macroeconomic uncertainty, rate cut expectations, geopolitical
tensions, and central bank demand all aligned in support, the $4,000 level is no
longer just a theoretical ceiling — it is a plausible next target. Still, the
path is unlikely to be smooth. Corrections, sentiment shifts, and external
shocks may temper the pace of the rally. However, for long-term holders, the
thesis remains compelling.
About Octa
Compliance reminder: trading Contracts for Difference (CFDs) carries a high level of risk
and may not be suitable for all investors. Emotional trading can increase this
risk. Always trade within your means and understand the risks involved.
Octa is an international broker that has been providing online
trading services worldwide since 2011. It offers commission-free access to
financial markets and various services used by clients from 180 countries who
have opened more than 52 million trading accounts. To help its clients reach
their investment goals, Octa offers free educational webinars, articles, and
analytical tools.
The company is
involved in a comprehensive network of charitable and humanitarian initiatives,
including the improvement of educational infrastructure and short-notice relief
projects supporting local communities.
Since its
foundation, Octa has won more than 100 awards, including the ‘Most Reliable
Broker Global 2024’ award from Global Forex Awards and the ‘Best Mobile Trading
Platform 2024’ award from Global Brand Magazine.
