Wealth giant State Street Global Advisors believes that the gold market has evolved into a higher price regime, set to exceed US$3,000/oz for the rest of 2025. Prices could even test the US$4,000–US$5,000 range in the next year or two, it said.
State Street’s gold strategy team, led by Aakash Doshi, said in its mid-year market outlook that gold’s price during the first five months of the year – totalling returns of some 25 per cent – cements the yellow metal as the leading global macro asset class.
“Whether a lingering global inflation impulse, trade war, US retrenchment, government debt loads or vox populi political movements, demand for gold as a low volatility, portfolio diversifying, perceived safe-haven* asset, should continue especially as the probability distribution of policy, geopolitical and macroeconomic outcomes widens,” the team said.
As such, it said that the US$3,000 represents gold’s new floor. Even in the event that trade tensions moderate, State Street’s base case has gold sustaining record levels between US$3,100 and US$3,500 for the rest of 2025.
“Our bull case scenario (30 per cent probability) sees gold approaching US$4,000/oz over the next six to nine months under certain macroeconomic conditions, including stagflation and accelerated de-dollarisation.”
On the other hand, State Street’s bear case, to which it assigns a 20 per cent probability, sees the commodity hovering between US$2,700 and US$3,100 in the event of a material de-escalation between the US and China, alongside a return to the US dollar and US growth exceptionalism.
Either way, the wealth giant remains bullish over the medium term on the back of tactical factors – spanning uncertain trade policy, exchange-traded fund (ETF) flows, recession risks and potential easing from the Fed – and structural factors, like central bank buying and sovereign debt burdens.
“As the highly uncertain US-Sino/US-World trade policy and geopolitical outlook continue to evolve, we frame five themes we expect will support a bullish gold price environment,” the team said.
Namely, State Street believes that gold ETF inflows are set to increase, given that physically backed gold ETF worldwide tonnage is still down some 20 per cent from peaks in COVID-19 – according to them, there’s plenty of room to run.
Moreover, spiking onshore gold price premiums indicate a meaningful rebound in Chinese consumer demand. State Street also maintains that central bank gold demand will help dampen downside price volatility and support a higher price floor.
Lastly, record global sectoral debt is set to support a high gold price regime, while rate cutting from the Fed is poised to help zero-coupon assets like gold.
“In this environment, gold has the potential to stand out as a resilient store of value because it has no liability, does not depend on repayment, and does not require yield to justify its role in a portfolio,” State Street said.
It comes as the gold prices finished out May almost flat US$3,278, although this was not without some intra-month volatility. Year-to-date, gold remains up some 26 per cent.
New data from the World Gold Council also pointed to the decision by US federal courts to block the Trump administration’s sweeping tariffs, which lit a relief rally in risk assets on 29 May.
“However, this might only be temporary as several options appear available to the administration to sidestep the judgement … For now we assume little change,” the council said on the yellow metal.
“Notwithstanding the temporary setback for Trump’s policies following the US federal court decision, the stagflationary picture continues to develop.”
These environments, it said, usually play out well for gold. Essentially, bonds suffer because inflation is higher, while cyclical commodities tend to suffer from lower growth.
“Historically, it hasn’t always played out like this, but, on average, stagflationary episodes have been quite good for gold relative to stocks, cyclical commodities and bonds.
“But we don’t necessarily have to wait for such an environment to play out. Further analysis suggests that stagflationary expectations are nearly as influential in driving gold’s relative average outperformance, whether we get there or not.”
Nonetheless, the council said that gains as aggressive as the ones we saw earlier in the year might be harder to come by, given just how large gold’s growth has been in recent months.
“The hitherto strong run-up in gold prices makes incremental gains perhaps harder to achieve,” it said.
