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According to the World Gold Council’s (WGC) mid-year report released on Tuesday, gold prices skyrocketed by 26 percent during the first half of 2025, achieving 26 new all-time highs. This surge is largely attributed to investor interest in gold as a safe-haven asset amidst a weakening US dollar, stagnant bond yields, and escalating geopolitical unrest.
The WGC’s report, titled “Downhill or Second Wind?”, examines the potential trajectory for gold prices in the latter half of the year. It suggests that, under current expectations, gold could appreciate by an additional 0 to 5 percent.
Nevertheless, deteriorating macroeconomic indicators such as stagflation or a potential recession may propel gold prices up another 10 to 15 percent, while a resolution of ongoing conflicts could cause a decline of 12 to 17 percent.
“Gold continues to break records, strengthening against all major currencies despite a tumultuous global environment,” the report noted.
Robust Demand and ETF Trends
In the first half of 2025, the average daily trading volume for gold reached a historic high of $329 billion, bolstered by significant activity in over-the-counter markets, exchange trading, and a resurgence in gold-backed ETFs. The global assets managed in these ETFs soared by 41 percent to $383 billion, with total gold holdings increasing by 397 tonnes to 3,616 tonnes – the highest level since August 2022.
Central banks continued to purchase gold at a strong pace, although slightly less than peak levels, reflecting an ongoing trend to diversify away from US dollar reserves. According to the WGC’s attribution model, factors like a weakening dollar and stagnant yields contributed 7 percent to gold’s returns, while risk and uncertainty accounted for an additional 4 percent.
The Decline of the Dollar and the Rise of Gold
The US dollar experienced its worst start to the year since 1973 due to global anxieties surrounding US trade policies and political stability. Demand for US Treasuries, which typically serve as safe-haven investments, waned in April as increased market volatility led investors to prefer gold.
“Geopolitical risks related to trade were significant, influencing not just the dollar but also interest rates and broader market fluctuations, which ultimately enhanced gold’s attractiveness,” the report observed.
Second Half Projections: Consolidation or Breakout?
Consensus expectations indicate that global growth will be below trend alongside persistently high inflation in the second half, with the US Consumer Price Index (CPI) anticipated to reach 2.9 percent.
The Federal Reserve is expected to lower interest rates by 50 basis points by the end of the year. In this base case scenario, gold is likely to stabilize with the possibility of modest gains.
The WGC cautions that severe scenarios, such as heightened stagflation, recession fears, or intensified geopolitical issues, could catalyze a stronger price rally. Conversely, a return to economic stability and decreased geopolitical risks may lead to weaker investment in gold and a more pronounced price retreat.
Even in a bearish context, however, the WGC identifies $3,000 per ounce as a key support level, highlighting that declining prices could stimulate consumer demand and deter recycling.
Long-term Resilience of Gold
While the report recognizes the inherent unpredictability of the global macroeconomic landscape, it affirms that gold remains a strategically sound asset.
“Considering the fundamental challenges in predicting the global economy, we believe gold, due to its foundational characteristics, remains well-suited to inform tactical and strategic investment decisions in the current economic climate,” the report concluded.
As of the end of June, gold was priced at $3,287 per ounce, having reached a record high of $3,434 on June 13.