Gold’s first half of 2025 delivered some of the strongest risk-adjusted returns of any major asset. After starting the year near US$2,600/oz, bullion surged to an April record above US$3,500, ending June around US$3,300 per ounce. That 26 % rise in U.S. dollar terms added 26 new all-time highs and produced the highest average trading volume ever recorded. Behind the rally were aggressive central-bank purchases, surging safe-haven demand amid geopolitics and tariff risks, and expectations that the Federal Reserve’s tightening cycle was over. The move wasn’t purely driven by inflation; rather, institutional investors treated gold as balance-sheet insurance, building a structural bid even as inflation cooled later in the period.
The following report dissects every major price push or correction from January to June 2025, examines the official-sector accumulation that helped create a perceived $3,800 floor, and analyses the macro forces that will shape the second half of the year.
January–March: From Rate-Cut Hopes to Geopolitical Hedge
January surge on rate-cut optimism and tariff fears
Gold entered 2025 bid by hopes that the Federal Reserve would resume cutting interest rates after a brief pause. Tariff rhetoric from the Trump administration and a weaker U.S. dollar added further support. The World Gold Council’s January commentary shows bullion finished the month around US$2,812/oz, an 8 % month-on-month gain. Global gold-backed ETFs saw US$2.6 bn of inflows (≈30 t), and COMEX managed-money net longs increased by US$64 bn (≈150 t). Algorithmic volatility models flagged January as a high-variance environment; momentum strategies captured the sharp uptrend but reduced exposure ahead of the February CPI report.
February consolidation: flight-to-quality flows
February’s inflation data showed U.S. consumer prices up 0.5 % m/m and 3 % y/y — the largest annual increase in nearly eighteen months. Despite the hotter-than-expected print, gold barely gave ground, closing at US$2,835/oz (up 0.8 % m/m) and setting a new record high at US$2,937/oz. ETF inflows accelerated to US$9.4 bn (≈100 t) as investors sought protection against sticky inflation and geopolitical risk.
March breakout: record highs on currency and tariff dynamics
March delivered the strongest month of the half. A surge in the euro drove the U.S. dollar lower, while escalating tariff threats stoked safe-haven buying. Gold closed March at US$3,115/oz, a 9.9 % monthly gain, and registered an all-time high. U.S.-listed ETFs added US$6 bn (≈67 t), Europe and Asia another US$1 bn each. The Federal Reserve’s 19 March FOMC statement held rates at 4.25–4.50 % but slowed its balance-sheet runoff — reinforcing gold’s appeal as a hedge.
April–June: Resilience Through Uncertainty
April: volatility premium and fresh record
Gold’s ascent continued in April, breaking through US$3,500/oz intraday before settling above US$3,300/oz. The World Gold Council attributed the 6 % monthly rise to a weaker dollar, higher volatility, and persistent geopolitical concerns. A new record of US$3,434/oz was set on 22 April. Algorithmic models noted clustering around Middle-East headlines as Israel–Iran tensions intensified.
May: consolidation amid tariff noise
May saw consolidation near US$3,278/oz, down 0.7 % m/m, with year-to-date gains still near 26 %. Tariff uncertainty and profit-taking led to US$1.8 bn ETF outflows (≈19 t), while COMEX net longs rose modestly. Traders awaited clarity from U.S. data and the FOMC’s June meeting.
June: geopolitical spikes and fiscal anxiety
On 13 June, Israeli strikes on Iranian sites lifted gold 1.3 % to US$3,428/oz, near April’s record. Later, ceasefire news saw spot gold steady around US$3,327/oz. The market priced in an 85 % probability of a September Fed rate cut, but massive U.S. Treasury issuance (≈US$1 trillion) sparked concern about rising yields. Inflation meanwhile cooled: March CPI slowed to 2.4 % y/y, giving the Fed breathing space. The interplay between softer inflation, fiscal risk, and geopolitics kept volatility high, but gold held firm above US$3,300.
Central-Bank Gold Reserves: The Quiet Engine of Demand
Central banks remained consistent buyers. The World Gold Council reported 22 t of net additions in June and 123 t across H1, led by Uzbekistan, Kazakhstan, and China, with Singapore trimming holdings. Poland (+67 t), Azerbaijan (+35 t), and Kazakhstan (+22 t) topped the year-to-date rankings. Total official-sector demand reached 166 t in H1, only slightly below 2024’s record pace, with projections near 1,000 t for 2025. Central banks viewed gold as neutral reserve collateral amid de-dollarisation, sanctions risk, and widening fiscal deficits — forming a durable structural floor.
Macro Themes Defining H1 2025
- Inflation & Policy: January CPI spiked 0.5 % m/m, 3.0 % y/y, forcing the Fed to hold rates. By March, inflation slowed to 2.4 % y/y, shifting market focus toward September cuts. The ECB signaled caution, while China’s PBoC injected liquidity to support domestic growth.
- Geopolitics: The Ukraine war stagnated, but Middle East tensions dominated headlines. Israeli-Iran conflicts drove short-term surges, while Taiwan tensions maintained a risk premium.
- Fiscal Stress: Congress’s debt-ceiling deal implied US$1 trillion in new Treasury issuance, while Trump’s fiscal package could add US$2.8 trillion over a decade — both weakening dollar sentiment.
- AI & Sentiment: Machine-learning models highlighted volatility clustering near Fed and geopolitical events, correlating gold surges with yield volatility and negative dollar momentum.
Investor Positioning & Institutional Flows
ETF Flows:
- Jan: US$2.6 bn inflows
- Feb: US$9.4 bn inflows
- Mar: US$8 bn inflows
- May: US$1.8 bn outflows
Total global ETF inflows in H1 2025: US$38 bn (397 t) — the largest since 2020. U.S. funds added 206.8 t, Asia 104.3 t.
Futures Positioning:
Speculative longs rose early but moderated after March as traders locked profits. “Smart money” (central banks, ETFs, macro funds) dominated, using dips to build exposure while retail demand slowed.
Outlook for H2 2025
- Base Case (40 %) – Sideways trade with 0–5 % upside as Fed cuts once or twice.
- Bullish (35 %) – Economic deterioration or fresh geopolitical escalation could lift gold 10–15 %.
- Bearish (25 %) – Rapid de-escalation or aggressive Fed easing may trim prices 12–17 %.
If central-bank accumulation continues and the Fed delivers gradual cuts, gold’s institutional base is likely to harden above US$3,800, potentially setting up a move toward US$4,000 by early 2026.
Conclusion
H1 2025 reaffirmed gold’s role as a multi-faceted hedge — against policy uncertainty, geopolitical shocks, and fiscal stress.
Three enduring pillars define this cycle:
- Relentless central-bank demand, especially from Poland, Azerbaijan, and China.
- Macro crosswinds — tariffs, sticky early inflation, and record Treasury issuance weakening the dollar.
- Institutional flows amplified by AI-driven strategies that bought dips and monetised volatility.
With policy easing on the horizon and fiscal headwinds persistent, gold is firmly entrenched as institutional collateral — not just a commodity.
If the Fed maintains its path and central-bank buying endures, gold’s structural floor above US$3,800 looks increasingly permanent heading into 2026.
