2025 Gold Market Outlook: Analysis of Hong Kong Gold Price Trends

By the end of 2024 and the beginning of 2025, the international gold market experienced a strong rally, with prices rising from less than $4,300 per ounce at the start of the year to briefly surpass the historic high of $4,400. Although there was a pullback afterward, the enthusiasm remained high. What underlying logic is driving this market trend? For Hong Kong investors, how will the gold prices in Hong Kong evolve?

Why Has Gold Become the Market Darling of 2025?

The Strongest Rally in 30 Years

According to Reuters data, the gains in gold prices from 2024 to 2025 are approaching the highest levels in nearly 30 years, surpassing the 31% increase in 2007 and the 29% in 2010. This surge is not accidental but the result of multiple factors working together.

The Three Core Forces Driving Gold Prices Higher

Continued Buying by Global Central Banks

The World Gold Council(WGC)'s latest report reveals an important phenomenon— in Q3 2025, global central banks net purchased 220 tons of gold, a 28% increase quarter-over-quarter. In the first nine months, total gold purchases reached approximately 634 tons, slightly below the same period last year but still well above historical averages.

More notably, 76% of surveyed central banks believe they will increase their gold reserves over the next five years, while expecting the dollar reserve ratio to decrease accordingly. This shift reflects a renewed recognition among major economies of gold’s importance as a reserve asset.

Expected Changes in U.S. Monetary Policy

The Federal Reserve’s rate cut policies directly influence gold’s attractiveness. Historical data clearly shows a negative correlation between gold prices and real interest rates—when rates fall, gold rises.

The logic behind this is: Real interest rate = Nominal interest rate – Inflation rate. When rates decline, the opportunity cost of holding non-yielding gold decreases, making it more attractive. According to CME’s FedWatch tool, the probability of a 25 basis point rate cut in December is 84.7%. Such market expectations often directly push up gold prices.

It’s worth noting that after the September FOMC meeting, gold prices actually declined, mainly because the 25 basis point rate cut was fully in line with market expectations and had been priced in advance. Additionally, Powell characterized it as a “risk management rate cut” rather than a policy shift, causing market participants to adopt a wait-and-see attitude regarding future rate cuts, which led to a retreat from high levels.

Geopolitical and Economic Uncertainty

Market uncertainty caused by trade policy changes has been a key trigger for this year’s gold rally. Historical experience shows that during periods of policy uncertainty, risk aversion spikes, often boosting gold prices by 5-10% in the short term.

Furthermore, the high global debt environment (IMF data shows total global debt reaching $307 trillion) limits the flexibility of monetary policy, favoring easing measures that indirectly lower real interest rates and reinforce gold’s role as a store of value. Ongoing conflicts such as the Russia-Ukraine war and Middle East tensions also continue to boost safe-haven demand for precious metals.

How Do Market Institutions View Gold’s Outlook?

Despite recent volatility, mainstream investment institutions remain optimistic about gold’s medium- and long-term prospects:

• J.P. Morgan’s commodities team considers the recent correction a “healthy adjustment,” raising their Q4 2026 gold target price to $5,055 per ounce.
• Goldman Sachs reiterates a target of $4,900 per ounce by the end of 2026.
• Bank of America strategists suggest gold could challenge the $6,000 mark next year.

The physical gold market also reflects this optimism—well-known brands like Chow Tai Fook and Luk Fook Jewelry still quote pure gold jewelry prices above HKD 1,100 per gram, with no significant decline.

Different Investor Strategies

For Short-term Traders:
The current volatile environment offers ample trading opportunities. XAUUSD liquidity is high, and the logic behind price movements is relatively clear, especially during sharp rises or falls where bullish and bearish forces are easily identifiable. Tracking U.S. economic data releases via economic calendars and capturing volatility around these times can effectively enhance returns.

For Long-term Holders:
Be prepared for significant fluctuations. Gold’s annual volatility averages 19.4%, comparable to the S&P 500’s 14.7%. Over a 10-year or longer cycle, the logic of gold preservation and appreciation holds, but prices can double or halve in the process. Transaction costs for physical gold (5-20%) are relatively high, so over-allocating is not advisable.

For Portfolio Diversifiers:
Gold as a hedge in investment portfolios has value, but don’t allocate all your funds to it. Diversification remains key, especially considering currency risk—Hong Kong investors should pay attention to how USD/HKD exchange rate fluctuations impact actual returns.

For Novice Investors:
Start with small amounts to test the waters and avoid blindly chasing highs. Gold prices in Hong Kong are highly correlated with international markets, and volatility should not be underestimated. Never follow market hype impulsively, as this often results in buying at high and selling at low, creating a vicious cycle.

Key Reminders

Gold remains a globally trusted reserve asset with solid medium- and long-term fundamentals. However, in actual trading, short-term risks should be carefully managed, especially around U.S. economic data releases and Federal Reserve meetings. For investors seeking to seize current opportunities, combining fundamental analysis with technical signals and adopting strategies aligned with their risk tolerance is the correct approach to navigating the market.