Gold had a spectacular first half of 2025, with SPDR Gold Trust GLD adding about 24%. While gold prices took a hit in the past month as evident from the 2.2% decline in GLD, the precious metal again started to move northward, buoyed by growing optimism that the Federal Reserve will resume interest rate cuts later this year. Markets priced in the likelihood of at least two rate reductions by the Fed in 2025.
Strong Year-to-Date Performance
So far in 2025, gold has risen approximately 25%, now trading less than $200 below April’s all-time high. The precious metal’s strength has been underpinned by the ongoing geopolitical and trade tensions, along with growing concerns over the global economic impact of President Trump’s proposed tariff agenda.
Weak Dollar Fuels Bullion Appeal
The U.S. dollar has taken a hit, with a key dollar gauge down nearly 11% in the first half of the year — its worst showing since 1973. This depreciation has further boosted the appeal of gold as the metal is priced in the greenback.
Other Precious Metals Surge Amid Tight Supply
Platinum too capped a remarkable 29% gain in June — its strongest monthly rally on record. The surge has been attributed to tight supply conditions and robust demand from Chinese jewelry manufacturers, coupled with speculative buying from both the United States and China. In addition to gold and platinum, both silver and palladium posted gains, reflecting broad strength across the precious metals complex.
Gold Prices Remain Elevated but Overvalued, Says RBC
In early April 2025, analysts at RBC Capital Markets commented that gold remains overvalued from a macroeconomic perspective. They emphasized that recent price increases were driven by uncertainty, and the factors creating that uncertainty were equally unstable.
Despite the potential for a correction, they noted that weakening economic sentiment was likely to support gold's appeal—suggesting that high prices were likely to persist, as quoted on Kitco.
What Lies Ahead?
A further rise in gold prices would require soft economic sentiments and rumors about economic slowdown to translate into weakness in hard data. This transition could fuel a more aggressive move by investors into gold.
Hard Data Remains Resilient—for Now: Limited Score for Further Upside in Gold
Despite negative projections, actual economic data continues to show decency. However, we know that a clear downturn in the real economy could lead the Federal Reserve to shift from its current neutral policy stance to rate cuts, which can spark a fresh rally in gold.
Investing in Gold ETFs
Against this backdrop, one can closely track gold-based exchange-traded funds (ETFs). Some options in the market are SPDR Gold Shares GLD, iShares Gold Trust Micro IAUM, SPDR Gold MiniShares Trust GLDM and iShares Gold Trust IAU.
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SPDR Gold Shares (GLD): ETF Research Reports iShares Gold Trust (IAU): ETF Research Reports SPDR Gold MiniShares Trust (GLDM): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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