For most of 2025 to now, the price of gold has almost continued to rise, hitting record highs repeatedly. Since October 2022, gold prices have almost doubled, rising more than 25% in 2025 alone, reaching a new all-time high of $3,500 per ounce on April 22. The $4,000 price level, once considered a pipe dream, is now openly discussed on trading floors around the world. This article analyzes the drivers behind gold's remarkable rally and what may come next.
Geopolitical tensions are the main catalyst
The global environment in 2025 is far from peaceful. Wars in the Middle East and Eastern Europe continue, and long-term solutions still seem out of reach. Tariff frictions continue. The United States has increased tariffs on China to 145%, and China has increased tariffs on American goods from 84% to 125%. In the latest round of actions, the Trump administration has re-adopted a trade war stance. This growing global uncertainty has prompted investors to turn to safe-haven assets, and gold is one of the most time-tested safe havens. As global trade suffers and economic growth prospects dim, gold's hedging role becomes more apparent.
Monetary Policy Expectations and Rate Cut Expectations
Historically, gold tends to perform better when interest rates are low. The current U.S. monetary policy outlook provides a favorable environment for the precious metal. Given weak economic signals, the Federal Reserve is widely expected to cut interest rates at least twice in 2025. The latest data from the U.S. Department of Labor showed that U.S. consumer prices unexpectedly fell in March, which strengthened expectations for an accommodative policy stance by mid-year. Market participants now see about a 30% chance of a 100 basis point rate cut by December.
However, the Fed may be forced to change policy direction as tariffs could lead to a resurgence of inflation. Such a move could undermine gold's upward momentum. For now, though, lower interest rates make non-yielding assets such as gold more attractive, potentially driving prices further up.
A weaker dollar boosts gold's appeal
The U.S. dollar index recently saw its biggest drop since 2022, hitting a new yearly low. A weaker dollar typically supports gold, making it easier for holders of other currencies to buy it. This trend, coupled with increasing uncertainty, has fueled strong demand, further boosting gold prices. In fact, signs of increasing demand have been evident since the beginning of the year. According to data from Bank of America Global Research, net inflows into gold funds reached a record $80 billion as of mid-April.
Central Bank Purchases and De-Dollarization
Another factor driving gold prices higher is rising structural physical demand, especially as global central banks are actively increasing their gold reserves. The People's Bank of China increased its gold reserves to a record level in the first quarter of 2025, highlighting the strategic importance of gold. This structural demand is consistent with the broader de-dollarization efforts led by the BRICS countries. Some countries are diversifying away from US Treasuries and the US dollar and turning to gold as a reliable store of value, which strengthens the long-term demand fundamentals.
Exchange Traded Fund (ETF) Fund Flows Reflect Retail and Institutional Demand
Investors' growing optimism about gold is also reflected in exchange-traded funds (ETFs). In March 2025, gold ETFs saw large inflows, especially in North America. These flows indicate strong interest from both retail and institutional investors, further adding to the nervousness in the market.
Key Risks to Gold’s $4,000 Target
While the overall environment is favorable for gold prices to rise, gold may not reach its $4,000 target and could instead fall sharply due to several factors:
Unexpected Rise in Inflation and Interest Rate Reversal: If inflation resurfaces due to tariffs and supply disruptions, central banks may be forced to abandon their accommodative policies. A shift by the Fed to tightening policies could be positive for the dollar, putting downward pressure on gold prices, potentially breaking bullish expectations.
Geopolitical Stabilization: Easing global tensions, especially between the U.S. and China or in Eastern Europe, could significantly reduce safe-haven demand. While this is not the base case for 2025, it is still an unexpected risk that traders must consider. In fact, gold prices have already retreated from recent highs after U.S. President Trump hinted at a possible reduction in tariffs on China.
Technically Overbought Conditions: The sharp rise in gold prices increases the likelihood of a correction. If the upward momentum slows, profit-taking could trigger a rapid and sharp sell-off. As with any parabolic rise, volatility is inevitable: prices tend to experience short-term downtrends before setting new all-time highs. Traders with short-term strategies should be aware of such price declines and practice risk management: avoid large trades, set stops, and diversify the portfolio.
A combination of macroeconomic, structural, and technical factors is pushing gold into uncharted territory. Supported by a combination of macroeconomic uncertainty, expectations of rate cuts, geopolitical tensions, and central bank demand, the $4,000 price level is no longer just a theoretical ceiling, but a reasonable next target. However, the path to gold's rise is unlikely to be smooth. Pullbacks, shifts in market sentiment, and external shocks could slow the pace of the rise. However, for long-term holders, the argument remains compelling.
XAUUSD GOLD XAUUSD GOLD
Geopolitical tensions are the main catalyst
The global environment in 2025 is far from peaceful. Wars in the Middle East and Eastern Europe continue, and long-term solutions still seem out of reach. Tariff frictions continue. The United States has increased tariffs on China to 145%, and China has increased tariffs on American goods from 84% to 125%. In the latest round of actions, the Trump administration has re-adopted a trade war stance. This growing global uncertainty has prompted investors to turn to safe-haven assets, and gold is one of the most time-tested safe havens. As global trade suffers and economic growth prospects dim, gold's hedging role becomes more apparent.
Monetary Policy Expectations and Rate Cut Expectations
Historically, gold tends to perform better when interest rates are low. The current U.S. monetary policy outlook provides a favorable environment for the precious metal. Given weak economic signals, the Federal Reserve is widely expected to cut interest rates at least twice in 2025. The latest data from the U.S. Department of Labor showed that U.S. consumer prices unexpectedly fell in March, which strengthened expectations for an accommodative policy stance by mid-year. Market participants now see about a 30% chance of a 100 basis point rate cut by December.
However, the Fed may be forced to change policy direction as tariffs could lead to a resurgence of inflation. Such a move could undermine gold's upward momentum. For now, though, lower interest rates make non-yielding assets such as gold more attractive, potentially driving prices further up.
A weaker dollar boosts gold's appeal
The U.S. dollar index recently saw its biggest drop since 2022, hitting a new yearly low. A weaker dollar typically supports gold, making it easier for holders of other currencies to buy it. This trend, coupled with increasing uncertainty, has fueled strong demand, further boosting gold prices. In fact, signs of increasing demand have been evident since the beginning of the year. According to data from Bank of America Global Research, net inflows into gold funds reached a record $80 billion as of mid-April.
Central Bank Purchases and De-Dollarization
Another factor driving gold prices higher is rising structural physical demand, especially as global central banks are actively increasing their gold reserves. The People's Bank of China increased its gold reserves to a record level in the first quarter of 2025, highlighting the strategic importance of gold. This structural demand is consistent with the broader de-dollarization efforts led by the BRICS countries. Some countries are diversifying away from US Treasuries and the US dollar and turning to gold as a reliable store of value, which strengthens the long-term demand fundamentals.
Exchange Traded Fund (ETF) Fund Flows Reflect Retail and Institutional Demand
Investors' growing optimism about gold is also reflected in exchange-traded funds (ETFs). In March 2025, gold ETFs saw large inflows, especially in North America. These flows indicate strong interest from both retail and institutional investors, further adding to the nervousness in the market.
Key Risks to Gold’s $4,000 Target
While the overall environment is favorable for gold prices to rise, gold may not reach its $4,000 target and could instead fall sharply due to several factors:
Unexpected Rise in Inflation and Interest Rate Reversal: If inflation resurfaces due to tariffs and supply disruptions, central banks may be forced to abandon their accommodative policies. A shift by the Fed to tightening policies could be positive for the dollar, putting downward pressure on gold prices, potentially breaking bullish expectations.
Geopolitical Stabilization: Easing global tensions, especially between the U.S. and China or in Eastern Europe, could significantly reduce safe-haven demand. While this is not the base case for 2025, it is still an unexpected risk that traders must consider. In fact, gold prices have already retreated from recent highs after U.S. President Trump hinted at a possible reduction in tariffs on China.
Technically Overbought Conditions: The sharp rise in gold prices increases the likelihood of a correction. If the upward momentum slows, profit-taking could trigger a rapid and sharp sell-off. As with any parabolic rise, volatility is inevitable: prices tend to experience short-term downtrends before setting new all-time highs. Traders with short-term strategies should be aware of such price declines and practice risk management: avoid large trades, set stops, and diversify the portfolio.
A combination of macroeconomic, structural, and technical factors is pushing gold into uncharted territory. Supported by a combination of macroeconomic uncertainty, expectations of rate cuts, geopolitical tensions, and central bank demand, the $4,000 price level is no longer just a theoretical ceiling, but a reasonable next target. However, the path to gold's rise is unlikely to be smooth. Pullbacks, shifts in market sentiment, and external shocks could slow the pace of the rise. However, for long-term holders, the argument remains compelling.
XAUUSD GOLD XAUUSD GOLD 
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Continuously release precise trading plans to lead members to expand profits, with a stable profit of 988% every month. If you have not made a profit yet, then join us. t.me/fahsufnwks
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.