Almost no one on Wall Street saw the gold rally coming (and 5 things to watch now)

Here is a telling chart from Scotia highlighting gold year-end targets from Wall Street for 2025-2027. It shows nearly no one at or above spot and the consensus way below the current price of $2905.

As for Scotia, they highlight a handful of drivers and potential drivers for gold in the year ahead:

In 2025, we believe the gold price will continue to be driven by the macro call, particularly as it pertains to
interest rate cuts affecting both nominal and real rates (including inflation) and the U.S. dollar (USD). This
could be further supported by above-average global debt levels, uncertainty around the Trump trade wars,
geopolitical risk, and strong central bank buying.

They noted that gold tends to perform well when real rates are below 2% and that inflation is on its way to the Fed’s target.

An interesting note is that Chinese consumers are turning away from jewellery buying due to a soft economy and high prices. Q4 buying fell 29% y/y. That’s been offset by investment demand but it’s a worrisome trend (or an opportunity if the economy improves).

As for the whales, central bank buying was up 54% y/y in Q4 while production was flat. For all of 2024, they added 650 tonnes to reserves and Scotia sees 700 tonnes added this year.

5 Things to Watch:

1. Interest Rates: The Fed started cutting rates in late 2024 and Scotiabank expects 50bps of cuts in both 2025 and 2026. A more-rapid pace of cuts could boost good.
2. U.S. Dollar Trajectory: Scotia sees the Dollar Index weakening to ~107 in 2025 and ~105 in 2026, which would support gold prices if realized, though not much from 108 at spot.
3. Geopolitical Tensions: Ongoing conflicts in the Middle East and uncertainty around Trump trade policies could drive safe-haven demand.
4. ETF Flows: After outflows in early 2024, ETFs saw inflows in Q4. Continued investment demand will be a critical spot to watch.
5. Central Bank Buying: The pace of official sector purchases, particularly from China, India, and Poland looking to diversify reserves, remains a key demand driver.

Gold touched a record high of $2910 today in a $45 rally.

This article was written by Adam Button at www.forexlive.com.