HSBC: Gold prices are under pressure in the second half of the year!

The Zhitong Finance App learned that HSBC released a research report saying that since 2025, gold may have soared due to geopolitical events and economic uncertainty, but then it may fall back, but it will remain at an all-time high. Interest rate hikes are likely to be dampened by tightening monetary policy; a weaker dollar and strong purchases by central banks will provide support. Gold prices are forecast to remain high, thanks to fiscal debt, but falling physical demand and increased supply may put pressure on prices in the second half of 2025. The dollar is expected to weaken further in the second half of 2025, which should support gold, but it may not push it higher. Growing fiscal deficits in the US and other countries are boosting demand for gold and could be a key factor in the future.

HSBC's main views are as follows:

Gold outlook

On April 22, 2025, gold hit a record high of $3,500 per ounce.

This rise was driven by a combination of safe-haven and safe-haven purchases, partly due to the weakening dollar and economic and policy uncertainty.

Since this year, the Federal Reserve has clearly been unwilling to cut interest rates. This may at least curb gains, because the rise earlier this year was based on expectations that the Fed would cut interest rates drastically, but this expectation has not yet been realized.

The HSBC foreign exchange strategy team anticipates that the US dollar may weaken further in the second half of 2025. This should support gold, but it may not push it further higher. Growing fiscal deficits in the US and other countries are boosting demand for gold and could be a key factor in the future. Exchange-traded fund (ETF) investors have turned buyers. OTC trading (including actual capital) and momentum purchases remain strong. Long positions on the Chicago Mercantile Exchange (CME) are still high, but are likely to be liquidated.

Geopolitics, trade, and central banks

Geopolitical risks, including the ongoing war in Ukraine, the escalation of the Middle East conflict, and changes in US foreign policy, underpin gold.

However, after the attack on Iran, gold clearly failed to break through the April high of 3,500 US dollars per ounce. HSBC speculates that without a larger upgrade, gold may fall back. Tariffs still support gold, but are no longer a factor driving it higher.

Due to geopolitical risks and the diversification of the US dollar, central banks will probably still be large buyers of gold this year and next, but the purchase volume may fall below the peak in 2022 to 2024.

If the price of gold rises further above $3,300 per ounce, purchases from the official sector may slow down; if gold pulls back to close to $3,000 per ounce, purchases may increase.

Balance between supply and demand

High prices are spurring increased supply and reduced physical demand.

Mine production is expected to rise in 2025, despite a range of challenges faced by miners. The recycling rate is price sensitive; recycling is expected to increase this year.

High prices are weakening demand for jewellery and coins in major emerging markets and the OECD (OECD) market. This may be a key factor in holding back gains and keeping prices down.

However, demand for gold bars is expected to rise due to interest from institutional investors. Reduced physical demand and increased supply made more gold needed to be absorbed by investors. If the risk is not enough for investors to continue to buy gold in large quantities, the lack of potential physical purchases may cause the price to fall back.