Gold price predictions for the next five years: Third party data round up
Explore the future of gold prices and whether the yellow metal will continue its upward trend in the coming years.
Gold price prediction round up
Gold reached an all-time high of $2,685.49 per troy ounce in September 2024, exceeding many analysts’ predictions.
Earlier in September 2024, Fitch Ratings announced that it had revised its gold forecast, explaining that the change ‘reflect(s) the higher geopolitical premium due to the metal’s safe-haven status’.
As of 10 September 2024, Fitch expects gold to trade at $2,000 in 2025 – up from its previous prediction of $1,900 – and projects gold prices to decrease to $1,800 in 2026, which is up from $1,700.
Gold forecasts published later in the month – after the all-time-high – were more bullish. Trading Economics, a financial data provider, expects gold to rise to $2,623 in 2025 in its 30 September 2024 forecast.
Meanwhile, ING Group predicts gold prices to reach $2,700 in 2025, dropping to $2,680 in 2026.
Long-term gold outlook
Many analysts haven’t yet published their longer-term predictions due to the market’s unpredictable nature. But if gold’s performance in 2024 has taught us anything, it’s that past performance does not guarantee future results.
Back in April, the World Bank Group predicted gold would average at $2,100 in 2024 and decrease to $2,050 in 2025. Gold exceeded these expectations, with 2024 prices averaging $2,295 as of 30 September 2024. Gold’s current performance also outpaced Fitch Ratings’ forecast from early September 2024.
Forecasts from ING Group and Trading Economics, which were published after gold surpassed $2,600, predict a slowdown to gold’s uptrend and a potential decline in the next two years.
Gold prices in 2024
Gold prices have continued their upward trajectory in 2024, surpassing previous records and capturing the attention of traders worldwide.
Following its fast ascent during the first part of the year, gold traded at an all-time high of $2,685.49 per troy ounce on 26 September 2024. In Q4 2024, gold achieved its biggest quarterly gain since early 2016.
Strong bullish performance in 2023 and 2024 demonstrated gold’s resilience to persistent inflationary pressures and escalating geopolitical tensions in the Middle East and Eastern Europe, highlighting the precious metal’s role as a safe-haven asset.
Which factors could influence gold prices?
We can expect some potential volatility, but what happens next depends on the driving factors that influence gold prices.
Here are some of the forces that could move gold prices over the next five years:
- Global economic health – gold is considered a safe-haven asset because its price often has a negative trend correlation with the performance of major economies and stock markets. Concerns about slow global economic growth have driven demand for safe-haven assets, and if they persist then gold prices could continue to rise. Conversely, economic recovery across these major economies could lead to a decline in gold prices.
- Geopolitical stability – geopolitical tensions in regions like Eastern Europe and the Middle East, plus trade tensions between the US and China, push traders towards gold. De-escalation may lead to political and economic stability, causing gold prices to fall as traders shift back to traditional stocks. Conversely, ongoing or escalating conflicts could sustain the current uptrend.
- Inflation levels can significantly impact gold prices. Gold is often used as a hedge against inflation because its value remains relatively stable while purchasing power declines. If central banks successfully curb inflation through monetary policies, demand for gold might decrease, leading to lower prices. However, sustained inflationary pressures could keep the price of gold at a premium and possibly push it to new highs.
- Central bank policies and interest rates – In 2024, the Federal Reserve, Bank of England, and European Central Bank adopted dovish stances, lowering interest rates. This reduces the opportunity cost of holding non-yielding assets like gold, potentially enhancing its appeal. However, a shift toward hawkish policies, such as rate increases to combat inflation, could reduce demand for gold.
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Short history of gold
Gold has been known to humans for over 6,000 years, with the earliest known gold artefacts dating back to around 4,600 BCE, discovered in the Varna Necropolis in Bulgaria.
Throughout the centuries, the precious metal has been used as a store of value and a showcase of wealth. In the modern day and age, gold’s demand has expanded to industrial use, most notably in the production of electronics due to its excellent conductivity and resistance to corrosion.
As with many commodities, gold’s price is highly influenced by the forces of supply and demand. Yet the yellow metal is also seen as an investment asset, preserving value throughout centuries. Many traders view gold as a safe-haven asset, using it to hedge against inflation and economic uncertainty.
Gold is typically priced in US dollars, which means the precious metal often has an inverse relationship with the greenback. The US dollar’s currency strength hurts the price of gold as it becomes more expensive and less attractive for overseas buyers. Conversely, when the US dollar falls in value, it often fuels gold demand.
Gold can be bought as bullion in its physical form or traded through financial derivatives such as CFDs or spread betting.
Gold trading strategies to consider
Before diving into gold investing, it’s crucial to define a clear strategy. Various gold trading approaches can guide you on when to enter or exit a trade and how to manage your positions effectively, rather than relying solely on speculation. Keep in mind that strategies tailored for other assets, such as stocks or currency pairs, may not translate directly to gold trading.
Position Trading
This long-term approach involves holding a position over an extended period to profit from significant changes in gold prices.
News Trading
A short-term strategy based on market-moving events such as central bank announcements or economic data. Traders act quickly to capitalize on price shifts triggered by these developments.
Trend Trading
This method identifies price trends by analyzing patterns in gold's movements. Traders often rely on technical analysis and indicators to confirm trends, such as upward or downward movements, and adjust their positions as trends shift. Trend trading is also commonly used in gold CFD strategies.
Day Trading
Day traders open and close positions within a single session, taking advantage of intraday price fluctuations. With its high liquidity and narrow bid-ask spreads, gold is ideal for this strategy. Traders often leverage daily news or events to guide their trades.
Price Action Trading
This strategy focuses on analyzing recent price movements to make trading decisions. Unlike other approaches that consider long-term historical data, price action trading emphasizes current trends. Traders may also exploit price differences across exchanges like the Shanghai Gold Exchange, London Metal Exchange, and COMEX for arbitrage opportunities.
Balancing Risks and Rewards
Trading gold requires careful planning, market research, and risk management. Traders should stay informed, use strategies suited to their risk tolerance, and consider tools like stop-loss orders to minimize potential losses.
Rewards of Trading Gold:
Safe-Haven Asset
Gold is often considered a "safe-haven" during economic uncertainty, providing a hedge against inflation, currency devaluation, and market volatility.
High Liquidity
As one of the most traded commodities, gold offers high liquidity, allowing traders to easily enter and exit positions.
Profit Opportunities in Both Directions
Gold trading allows for potential profits in both rising (going long) and falling (going short) markets, depending on market conditions.
Diversification
Trading gold can add diversity to a portfolio, reducing overall risk when combined with other asset classes like stocks or currencies.
Predictable Responses to Global Events
Gold often reacts predictably to global events such as economic reports, geopolitical tensions, and monetary policy decisions, offering opportunities for traders who monitor these events.
Risks of Trading Gold:
Price Volatility
While gold is often seen as stable, it can experience sharp price swings due to global economic changes, interest rates, and geopolitical events.
Leverage Risks
Trading gold on margin amplifies both potential gains and losses. If the market moves against you, losses can exceed your initial investment.
Market Timing
Accurately predicting price movements requires skill and experience. Poor timing or incorrect analysis can lead to significant losses.
Geopolitical and Economic Factors
Gold prices are influenced by various unpredictable factors, such as central bank policies, inflation rates, and political unrest.
Limited Income Generation
Unlike stocks or bonds, gold doesn’t provide dividends or interest, so returns depend entirely on price appreciation or depreciation.
Final thoughts
Gold has shown remarkable performance in recent years, but its future will depend on a variety of price drivers, both within and outside the financial markets, such as economic and geopolitical factors.
Note that past performance does not guarantee future results. Analysts’ predictions for the gold price in the next five years may be wrong and shouldn’t be used as a substitute for your own research. Commodity markets remain volatile and shaped by the constant flux of economic and geopolitical events.
Perform your own due diligence before trading – look at the latest news, refer to a variety of trusted sources and use fundamental and technical analysis in your trading strategy.
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