Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 597

Will 2025 be another banner year for gold?

2024 witnessed a variety of events which shaped investor sentiment and asset performance. US elections stirred markets, while ongoing geopolitical tensions kept global investors cautious (Chart 1). The US Federal Reserve initiated an easing cycle with three rate cuts totalling 100 basis points, while the Reserve Bank of Australia (RBA) held rates steady, lagging its peers.

Chart 1: Relentless parade of geopolitical risks kept casting shadows over global landscape
Geopolitical risk index*

*As of 31 December 2024, on a 5-day rolling average basis. Source: GPR, World Gold Council

Assets saw varied performances (Chart 2). The AUD weakened by 10% against the dollar - the widening US-Australia yield spread, particularly in Q4 amid diverging stances from the Fed and the RBA, was a key contributor. Local equities finished the year stronger and Australian properties also powered higher.

However, gold, denominated in AUD, led all others in 2024, delivering a stunning 38% surge. Strong investment demand, rising geopolitical risks and a weaker AUD supported gold’s rally. And similar drivers have extended gold’s strength into 2025, delivering a 4.9% return so far.

Chart 2: Mixed bag domestic asset performance and gold held the lead
Various assets’ performances in AUD during 2024*

*As of December 2024 & 17 January 2025. Based on LBMA Gold Price PM, MSCI World Index, ASX REITs Index, Bloomberg AusBond Bank Bill Index, ASX300 Index, FTSE Global Infrastructure Index, Bloomberg AusBond Composite Index, Bloomberg Global Agg Index and FTSE Nareit Developed Index. All calculations in AUD. Source: Bloomberg, World Gold Council

2025 outlook: A case for gold in AUD to thrive?

This year is likely to be supportive for gold. As our 2025 Gold Outlook noted, while US Treasury yields and the dollar may stay elevated, upside potential for gold could come from continued central bank gold purchases and possible spikes in geopolitical risks. Meanwhile, volatilities in equities and bonds as well as potential weaknesses in non-US currencies could all provide additional boosts to investment demand for gold. Also, with uncertainties in US bond market staying elevated, we believe the impact from yield changes may be less pronounced on gold as our recent analysis shows.

Furthermore, we believe potential weakness in the Australian dollar may provide an additional boost to gold in local currency terms. Such currency weakness may stem from two main fronts:

1. Changes in monetary policy expectations

Although the RBA left rates unchanged in their December meeting, they noted that growth momentum has weakened and the upside risk of inflation has also diminished. And while labour market prints may muddy the case for a cut in February, Q4 inflation data should have more weight in the rate decision – and the cooling momentum may continue judging from November’s downward trend in the trim-meaned monthly CPI. Currently, the market is pricing in a 70bps cut in total for 2025, much higher than the previous expectation (Chart 3, left).

Conversely, reflation concerns in the US and the surprising strength in both growth and the labour market have made investors push back their expectations of further rate cuts – now the market is only pricing in around 50bps rate reduction in 2025, a pivotal change from around 100bps in December (Chart 3, right).

Thus, there is a possibility that the RBA delivers more rate cuts than the Fed, further widening the interest rate spread between the two countries, weighing on the AUD.

Chart 3: Diverging rate expectations
Policy rate expectations reflected in OIS futures*

*As of January 2025. Source: Bloomberg, World Gold Council

2. Potential growth risk

Restrictive financial conditions, declining real income and cooling momentum in the housing sector have weighed on Australian growth in 2024. And these risks may continue into 2025 if rates remain restrictive or the lagging effect of elevated interest rate continues to kick in. Additionally, uncertainties surrounding Chinese economic development may also pose challenges.

As historical data shows, sluggish growth usually lead to weakening currency of the country.

Other risks such as geopolitical challenges may also induce volatilities in local assets, creating stress for Australian portfolios. This was a key topic of concern among APAC investors  discussed in our previous research. We believe gold’s positive outlook and its ability to cushion geopolitical risks should make it a key asset in local portfolios (Chart 4).

Chart 4: Gold has performed well during geopolitical risk surges
Performance of various assets during geopolitical risk spikes*

*Based on average weekly performances in AUD of the LBMA Gold Price PM, Bloomberg Commodity Index, Bloomberg Australian Bond Index, Bloomberg Global Bond Aggregate Index, ASX300 Index, and MSCI World Index. We show here the average of the top 10 geopolitical risk surges based on the Geopolitical Risk Index. Source: matteoiacoviello.com, Bloomberg, World Gold Council.

In conclusion, after an exceptionally strong year, we believe gold could continue to shine in 2025. Although the macro development this year may bring some headwinds, the global geopolitical landscape and risks stemming from financial markets will keep attracting attention from both official institutions and retail investors. Meanwhile, the potential risk of the AUD weakness could make gold more attractive in local investors’ portfolios. And over the longer term, we anticipate a resilient return from gold, largely in line with global GDP growth.

 

Ray Jia is a Senior Research Analyst and Marissa Salim is a Senior Research Lead, APAC, at World Gold Council, a sponsor of Firstlinks. This article is for general informational and educational purposes only and does not amount to direct or indirect investment advice or assistance. You should consult with your professional advisers regarding any such product or service, take into account your individual financial needs and circumstances and carefully consider the risks associated with any investment decision.

For more articles and papers from World Gold Council, please click here.

 

RELATED ARTICLES

Trump's US dollar assault is fuelling CBA's rise

Credit cuts, rising risks, and the case for gold

Why gold’s record highs in 2025 differ from prior peaks

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Taxation

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

7 key charts on the state of the Australian property market

The Australian property market stirs fierce debate - often bullish optimism versus crash predictions. But beyond the noise, seven charts reveal what's really driving prices and the outlook moving forward.

A simple alternative to the $3 million super tax

Division 296 aims to introduce improved fairness into the superannuation system, yet is overly complex. This scours the world for better ideas and suggests a simpler alternative which can achieve the same goals.

CBA and the index conundrum for super funds

After the hyperbolic rise in CBA shares, super funds are floating the idea of carving out the weightings of ASX bank securities and indexing them within their portfolios. This looks at why that might be a big error.

Strategy

10 policies to drive Australian productivity higher

Here's a comprehensive list of proposed reforms to fix Australia's stagnating economy, including introducing a flat income tax rate, reducing migration, and making childcare tax-deductible.

Interviews

Where to find big winners in Asia

As more money looks for a home outside the US, Asia may soon get some love. Fidelity's Anthony Srom outlines the best places in Asia to invest, including in Chinese consumer names, Indian financials, and Thailand.

Investment strategies

We have trouble understanding the time value of money

We overvalue the present and underestimate the future - it’s a cognitive glitch called hyperbolic discounting. It affects savings, spending, and loans, and it's more common - and costly - than we think. 

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.