Why 2025 Could Be the Best Year for Gold Yet

Key Takeaways

• Gold All Time Highs
• Donald Trump's impact on the gold price
• Gold shortages in the UK  
• Demand of gold driven by China
• DeepSeek AI App influence on the US stock market

Precious Metals Industry and UK Bullion Market in January 2025 

January 2025 has been a month of significant activity in the precious metals industry, with gold prices reaching all-time highs in several major world currencies. This surge in gold prices has been driven by a combination of factors, including: 

• Geopolitical uncertainty: The ongoing war in Ukraine and rising tensions in other parts of the world have increased demand for safe-haven assets like gold. 
• Inflation: Persistent inflation in many countries has led investors to seek out gold as a hedge against rising prices. 
• Central bank buying: Central banks around the world have been increasing their gold reserves, further supporting the price of gold. 

In the UK, the bullion market has been particularly strong, with demand for gold coins and bars surging. The Royal Mint has reported a sharp increase in demand for gold coins, which are exempt from capital gains tax in the UK. 

Gold Hits All Time Highs In Major World Currencies

January 2025 kickstarted the year with a significant increase in the gold price, reaching all-time highs in several major world currencies. In the first month of 2025 gold hit, $2,819 per ounce in US Dollars (USD), £2,274 per ounce in British Pounds (GBP) and €2,720 per ounce in Euros (EUR).

What Impact Will Trump's Second Term Have On Gold?

It would be impossible for us not to mention the 45th and 47th President of the United States, Donald Trump, when discussing the current gold outlook for 2025. Trump was inaugurated at the United States Capitol on January 20, 2025. After the new US President took office, gold and silver prices surged due to uncertainty caused by his initial executive orders.

He followed through with his threat to hit imports from Canada and Mexico with 25% border taxes, also known as tariffs, on February 1, 2025. It's also believed the new US President is considering adding a 10% tariff on China. During his first presidency, a series of tariffs called 'Trump Tariffs' were imposed on China, referred to in the media as the 'Trump-China trade war'.

In January 2025, under Trump's presidency, a ceasefire and potential de-escalation in the Middle East began. However, it's uncertain if this will impact gold prices, especially with the ongoing war in Ukraine, which many hope Trump will resolve.

Gold Shortages In The United Kingdom  

Many bullion investors prepared as early as the US election. In London, United Kingdom, bullion has become less available as large gold shipments to the US have cleared out many gold vaults. UK investors are now fearing the worst due to the introduction of tariffs on imports from Canada and Mexico by the US President, which has caused gold shortages in the UK. This has sparked panic as liquidity in the London market has diminished.

The Financial Times reported as of January 29th that traders had amassed an $82bn stockpile of bullion in New York. It's also been reported that the wait time for withdrawing bullion from Bank of England vaults now ranges from a few days to up to eight weeks.

China's Increasing Demand For Gold

China is expected to play a key role in the increased gold demand for 2025. The People's Bank of China recently announced new gold purchases for two consecutive months after pausing in May 2024. This pause followed an 18-month buying spree from November 2022 to May 2024. In Q4 2022, China had approximately 2,010 tonnes of gold reserves, which grew to 2,260 tonnes by May 2024. Additionally, China discovered $83bn worth of gold reserves in Hunan, the world's largest gold deposit at 1,100 tonnes.

Chinese AI 'DeepSeek' App Unsettles Markets

On January 27th, 2025, the Chinese AI app Deepseek dominated major news outlets. The app's development caught markets off guard, leading to panic selling of tech stocks after claims emerged that it was developed at much lower costs than its US rival, ChatGPT. Nvidia, the first trillion-dollar company, experienced a significant 17% drop, erasing $593 billion in value, which sent shockwaves through the US stock market. However, markets have since stabilised and are beginning to recover in some cases.

Why 2025 Could Be the Best Year for Gold Yet 

Several factors suggest that 2025 could be an even better year for gold than 2024: 

• Continued geopolitical uncertainty: The war in Ukraine is likely to continue to be a major source of geopolitical risk, which should support demand for gold. 
• Easing inflation: While inflation is expected to remain elevated in 2025, it is likely to start to ease in the second half of the year. This could lead to increased investment demand for gold, as investors seek to protect their wealth from inflation. 
• Increased central bank buying: Central banks are likely to continue to increase their gold reserves in 2025, which should further support the price of gold. 

What will happen in February 2025? 

Looking ahead to February 2025, the outlook for the precious metals market remains positive. The factors that have supported gold prices in recent months are likely to remain in place, and there is potential for further upside. However, it is important to note that the precious metals market can be volatile, and there are risks to the downside.

Disclaimer: This blog post is for informational purposes only and should not be considered financial advice.