Traditionally, a weaker U.S. dollar and lower U.S. interest rates increase the appeal of non-yielding bullion. Economic and geopolitical uncertainty also tend to be positive drivers for gold, due to its safe-haven status and ability to remain a reliable store of value. It has low correlation with other asset classes, so can act as insurance during falling markets and times of geopolitical stress.

But given gold’s diverse and fluid drivers of demand at the moment, the metal has recently served both as a debasement hedge — or a form of protection against the loss of purchasing power of a currency due to inflation or currency debasement — and in its more traditional role as a non-yielding competitor to U.S. Treasurys and money market funds.

This means gold has developed what’s known as a “smile profile” to U.S. yields, where it has risen in both periods of falling and rising U.S. real yields for different reasons.

“Gold looks well situated to hedge the elevated levels of uncertainty around the macro landscape as the Trump administration announces new executive policy initiatives over the coming weeks and months, including tariffs,” said Gregory Shearer, head of Base and Precious Metals Strategy at J.P. Morgan.

 “Central Banks aren’t done with gold yet with added political uncertainty likely helping to stoke a revival into 2025,” said Shearer.

“With the PBoC buying again and the potential for China’s currency to be further devalued with the risk of tariffs, we think gold-owning appetite among Chinese consumers could receive a boost too as investors turn to gold as a real asset store of value,” said Shearer.

“Given this scenario is embedded in our economic base case, this enhanced purchasing in part helps push gold prices up towards our forecast for $2,950/oz by 4Q25,” Shearer added.

In the financial gold markets, investor futures positioning remain long, or with an expectation the price will rise in value in the future. Non-commercial futures and option long positions in COMEX gold, the primary futures and options market for trading metals, reached a new high in 2024 in real terms.

While it is the quickest component from a flows perspective, futures positioning is only one, relatively small, part of broader gold investor holdings which also includes gold ETF and physical bar & coin holdings.

Gold is still only around 2% of investor financial assets and notional real ETF holdings remain around 6% lower than 2020. In the event of a more benign macro environment in 2025 that refocuses attention on a Fed cutting cycle, further inflows into gold Exchange Traded funds (ETFs) are likely, as the attractiveness of money market funds wane.

“Gold ETF holdings will likely hold the key to higher prices under this scenario,” said Shearer.

Global ETF holdings sit at around 3,235 tonnes according to the latest World Gold Council tracking through December 2024. In tonnage terms this remains 18% lower than the previous peak and is around 6% lower than 2020 in notional real terms too.

ETF holdings are historically driven primarily by changes in interest rates, as lower interest rates increase the attractiveness of non-yielding gold as a risk-free asset.

“With over $6 trillion still parked in money market funds, this demand sector in particular looks primed for inflows under a more benign macro environment in 2025, which refocuses investor attention back on a Fed cutting cycle,” said Shearer.