Gold price may go past $3,500/ounce in global market
Even as many foreign analysts see gold prices scaling past the $3,500/ounce mark, the domestic industry does not see the yellow metal, which has already gained more than 20% so far this year, can scale that height.
Foreign analysts see the metal hitting a peak of $3200-3,300/ounce in the global markets this year. On the Chicago Mercantile Exchange, gold was trading at $3,161, a new peak at 1900 hours on Wednesday, while the domestic prices peaked at `9,356/gram for 24 carats. The Wednesday’s rally has most to do with the so-called 25% reciprocal import duties on all goods reaching the US shores, which President Donald Trump had said would be rolling in from US time on Wednesday.
From the fiscal year point of view, gold has dazzled in fiscal 2025, surging 38%, marking the best fiscal year since FY08 as investors sought refuge in safer haven assets on global developments, especially American tariff-related threats.
Analysts at Wall Street brokerages are expecting the prices to rally another 13% from the current levels through the next 18 months, driven by the rising global uncertainties along with investment demand mostly by central banks and Chinese insurers.
“Any rally has to have a stop, and historically gold never had a rally lasting more than six months. But the current rally — more than 19% so far in first three months of 2025 on top of a 22% jump in 2024 is quite unusual. In the worst case scenario, international gold prices may touch $3,330 and in the best case scenario it should be in the $3,100-3,200 range,” Abdul Nazar, the director of the All-India Gem & Jewellery Council, told TNIE from Kochi.
His price pessimism is based on the fact that retail demand is already waning given the higher prices and also his belief that Trump will not have his ways always as pushed to wall, other governments will also react, which will hit Americans more than what they gain from Trump.
According to another uncertainty around the Trump administration’s trade policies, can continue to push the dollar lower, further supporting gold prices near-term and if the dollar weakness continues, gold can go on to hit the $3,500 mark, analysts at Bank of America Securities said in a note. The brokerage had earlier projected the prices to scale $3,000 an ounce. As against this, the price had already crossed $3,155 mark for an ounce, which in terms of grams is 26.67.
A broad rebalancing of America’s twin deficits could be bullish gold, too, they added. Renisha Chainani, head of research at gold trading platform Augmont Gold, said in a note that the gold rally so far this year has been due to Trump's tariffs policies as nervous investors are racing to the safe-haven commodity as an heightened tariff war will raise inflation, slowing economic growth and intensifying trade tensions. Chainani told TNIE that he sees support in the domestic prices at $3100/ounce and resistance at $3200.
In a note, analysts at Bank of America Securities see investment demand continuing to keep gold prices high. “Central banks currently hold about 10% of their reserves in gold, and this can go up to 30% to make their portfolios more efficient. On the other hand, Chinese insurance industry can invest 1% of its assets in gold, which will be equivalent of around 6% of the annual gold market,” they said.
“Even retail investors have also been increasing their exposure to gold, with assets under management at physically backed exchange traded funds increasing by 4% year-to-date in the Americas, Europe and Asia," BofA said.
For gold to trade at an average of $3,000/oz this year, investment demand has to increase by just 1% but for the metal to hit $3,500/oz, it needs to rise by 10%, BofA Securities said, adding though this is a lot it is not impossible.
According to the brokerage, the key risks to more upsides in gold includes US fiscal consolidation, improving geopolitical situations, and a return to collaborative inter-governmental relations, including more targeted tariffs, which the US says would be effective from Wednesday.
When it comes to Chinese demand, it can be noted that already insurers there have invested a total $4.4 trillion in gold, the potential inflows into gold can be in the region of $25-28 billion, BofA said.
The brokerage also expects Chinese companies to purchase gold actively and use their allowance within a year as insurers face declining investment returns in a low interest rate environment, while gold is regarded as a good long-term asset to hold. All these together can lift gold demand by about 300 tonne purchases by Chinese alone, which is 6.5% of the annual physical market,” the BofA note said.