State Street Global Advisors’ SPDR gold strategy team has revised its outlook for gold, suggesting a new price floor of US$3,000 to US$3,100 per ounce in its latest monthly report for May. The adjustment comes in response to recent price surges and heightened market volatility.
Over the past 12 to 14 weeks, gold has shown resilience amid global economic uncertainty, briefly hitting a peak of around US$3,500 in April. The price has since moderated to approximately US$3,300, following a period of profit-taking by Western investors.
Despite the recent pullback, the strategy team expects prices to stabilize in the second quarter of 2025 after what it described as a “feverish pace” of growth. This consolidation is seen as a potentially healthier trend for the medium-term outlook.
“Global gold ETF physical holdings remain 18–20% below their 2020 pandemic-era highs,” the report noted. “Similarly, the significant decline in managed money net length on Comex has not led to a major sell-off in gold futures.” According to the team, these trends suggest ample room for renewed investor interest in gold as broader macroeconomic conditions evolve in the second half of 2025.
The outlook is further supported by expectations of three to four interest rate cuts by the U.S. Federal Reserve this year. In an environment of high inflation and slowing growth, falling real interest rates typically favor gold.
“Gold historically performs well in scenarios where real interest rates are declining, inflation concerns persist, and confidence in monetary policy is wavering. All three conditions are currently evident,” the report stated.
Strong Demand from Central Banks and Retail Investors
Central bank demand has continued to provide a solid foundation for gold prices. In the first quarter of 2025, central banks collectively purchased 244 metric tons of gold — a slight dip from the previous quarter but still 24% above the five-year quarterly average. The report described central banks as “sizable and price-inelastic” buyers, reflecting a structural shift in reserve management strategies amid fears of currency depreciation, geopolitical instability, and questions surrounding the long-term dominance of the U.S. dollar.
Retail investment in gold also remained steady, with demand rising 3% year-on-year. Meanwhile, Chinese investor interest in gold has picked up, partly in response to renewed U.S. tariffs. Onshore gold premiums in China rose from -0.1% in March to 1.3% in April, indicating increased domestic demand.
Price Forecasts: Base, Bull, and Bear Scenarios
State Street outlined three potential scenarios for gold prices through the remainder of 2025:
Base Case (45% probability): Gold trades in a range between US$3,100 and US$3,500, supported by a stabilizing growth pace and persistent geopolitical uncertainty.
Bull Case (35% probability): Prices surge to US$3,500–US$3,900, driven by escalating trade and tariff tensions, further weakening the U.S. dollar and prompting investors to reduce exposure to U.S. equities. Sustained demand from China and central banks would also contribute to this scenario.
Bear Case (20% probability): Prices retreat to a range of US$2,700 to US$3,100 due to a significant easing of trade tensions, particularly between the U.S. and China. Improved relations could prompt a shift back toward U.S. equities and reduce gold demand from Chinese investors and central banks.
State Street’s analysis highlights the evolving dynamics shaping the gold market, as investors weigh macroeconomic pressures, central bank policy, and global geopolitical developments heading into the latter half of the year.
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