Gold remains star asset as it nears $3,000

Gold’s status as one of the best-performing asset classes continues to defy the usual assumptions about the appeal of non-yielding bullion at a time of elevated interest rates.

The yellow metal’s spot price today topped $2,940 an ounce for the first time, a rise of 11% so far in 2025 having kept pace with the S&P 500 index during a strong 2024.

That’s despite no clear help from some of gold’s traditional drivers, particularly as December’s Federal Reserve meeting signalled a more hawkish stance on monetary policy in 2025.

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The strength of the greenback due to the rates outlook and the inflationary impact of Donald Trump’s recent tariff moves also dented the appeal of gold for non-dollar investors.

Instead, the safe-haven metal has benefited from fears of another trade war, as well as ongoing factors such as central-bank buying and increased demand from private China investors.

UBS Global Wealth Management recently raised its gold forecast to $3,000 for 2025 as it believes that the price will continue to be supported amid fragile risk sentiment and strong demand.

Source: TradingView. Past performance is not a guide to future performance.

It adds that forecast interest rate reductions by the Federal Reserve later this year should give a further boost to the investment case for gold.

The bank said: “We continue to see gold as an effective portfolio hedge and diversifier, and see value in structured strategies and stocks of gold miners.”

Last week, data from the World Gold Council showed that central banks' net buying exceeded 1,000 metric tons for the third straight year in 2024. This was more than double the average of 500 metric tons between 2011 and 2021.

UBS thinks that diversification and de-dollarisation should also support demand in the coming year. An increasing US federal deficit and the worsening of the country’s debt profile are other factors underpinning gold’s attractiveness versus the dollar.

Investment demand is also at a four-year high as inflows on exchange-traded funds (ETFs) resumed in the second half of the year.

The lack of attractive investment alternatives has led to unusually strong demand from China private investors, while the country recently allowed 10 insurance firms to buy gold for the first time in dealings worth up to 1% of their assets.

Capital Economics added this week that US investors may have been buying gold to get ahead of any future tariffs that might affect US gold imports.

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It suspects gold’s non-traditional drivers will provide some further support this year, including tariff uncertainty, but has stuck to its year-end forecast of $2,750 an ounce.

The consultancy said: “We think central-bank reserve diversification will only be slow-moving, and some central banks (and other investors) may be put off by gold’s sky-high price.”

The shares of FTSE 100-listed Endeavour Mining (LSE:EDV), which has assets in Senegal, Côte d’Ivoire and Burkina Faso, have risen by 18% this year and by 34% in the past year. Fresnillo (LSE:FRES), which is the world’s leading silver producer and one of Mexico’s largest gold firms, is up 20% and 60% respectively as it recovers from the 15-year low seen towards the start of 2024.

The combination of gold and copper price strength has boosted the shares of Antofagasta (LSE:ANTO) by 11% this year, although the shares are considerably below their high of 2,400p in May.

The company has four copper mines in Chile, with two at Los Pelambres and Centinela also responsible for significant volumes of molybdenum and gold as by-products.

In the FTSE 250 index, cost headwinds mean Hochschild Mining (LSE:HOC) shares have followed 2024’s strong performance with a fall of 15% so far in 2025.