## The Hidden Drivers Behind the 2025 Surge in Gold Prices: Analyzing the Link Between Hong Kong Gold Trends and Global Dynamics

The recent gold rally has extended from the end of 2024 into early 2025, with market enthusiasm continuing to heat up. After surpassing the historic high of $4,400 in October, despite a technical correction, investor attention remains high, especially as Hong Kong gold prices closely interact with international XAU/USD movements, boosting buying momentum across the Asia-Pacific region. What factors are driving gold prices to new highs? Is there still room for further gains?

### Core Factors Supporting Gold Prices

**Policy Uncertainty and Safe-Haven Demand**

In early 2025, a series of tariff policies were introduced, directly fueling risk sentiment in the market. Historical data shows that during periods of policy instability (such as the US-China trade war in 2018), gold prices typically see short-term gains of 5–10%. The current political and economic environment has led to a large influx of safe-haven capital into precious metals markets, which is a key driver behind the synchronized rise of international and Hong Kong gold prices.

**Expectations for US Dollar Monetary Policy**

The Federal Reserve’s interest rate decisions directly influence gold’s attractiveness. According to CME interest rate futures data, there is an 84.7% probability of a 25 bps rate cut in December. Real interest rates (nominal rate minus inflation) have an inverse relationship with gold prices—when rates fall, gold priced in USD becomes cheaper, attracting global capital. The brief dip in gold prices after the September FOMC meeting was due to market already pricing in the rate cut, but the uncertainty about the future rate path has increased gold’s volatility.

**Central Bank Accumulation Continues**

According to data from the World Gold Council (WGC), global central banks net purchased 220 tons of gold in Q3 2024, a 28% increase quarter-over-quarter. In the first nine months, total gold purchases reached approximately 634 tons, a recent high. Notably, 76% of surveyed central banks plan to increase their gold reserves over the next five years, while expecting a decline in USD reserve ratios. This reflects a structural shift in the international monetary system, and as Hong Kong serves as a financial hub in Asia-Pacific, its gold price trends also mirror this global asset reallocation.

### Other Factors Driving Gold Price Increases

**Slowing Economic Growth and High Debt Environment**

By 2025, global debt has reached $307 trillion. High debt levels limit the scope for interest rate hikes, prompting central banks to maintain accommodative policies, which in turn lower real interest rates and indirectly boost gold’s appeal as a store of value.

**Persistent Geopolitical Risks**

Unresolved conflicts in Ukraine and ongoing tensions in the Middle East increase market demand for safe assets amid uncertainty.

**Social Media and Short-term Capital Flows**

Continuous news coverage and social media sentiment resonate with investors, attracting large amounts of short-term capital ignoring risks, which amplifies the upward momentum. However, such capital can also exit quickly.

### 2026 Gold Price Outlook: What Do Institutions Say?

Despite recent technical corrections, major investment banks remain optimistic about gold’s outlook:

- **JPMorgan** sets its Q4 2026 target at $5,055/oz, viewing the current correction as a healthy adjustment
- **Goldman Sachs** maintains a target of $4,900/oz by the end of 2026
- **Bank of America** forecasts gold could challenge $6,000 next year and has raised its 2026 target to $5,000/oz

Looking at Hong Kong jewelers (Chow Tai Fook, Luk Fook, Chow Sang Sang, etc.), the pure gold jewelry prices remain stable above 1100 HKD/gram, with no significant decline, indicating retail confidence in the gold market’s future.

### Practical Advice for Retail Investors

**Short-term traders** should seize opportunities brought by volatility. Currently, liquidity is ample, and price swings are clear, especially around US economic data releases, providing short-term trading opportunities. Using economic calendars for real-time tracking can improve decision-making efficiency.

**Long-term buyers** should be prepared for significant fluctuations. The average annual volatility of gold is 19.4%, higher than the S&P 500’s 14.7%. Over a 10+ year horizon, gold has value as a hedge, but the potential for doubling or halving mid-term exists, requiring investors to have sufficient psychological readiness.

**Portfolio diversification** is essential. Gold’s volatility is comparable to stocks, and concentrating all assets in a single asset class is unwise. To maximize returns, consider combining long-term holdings with short-term trading strategies, especially during US market hours to capitalize on price movements.

**Cost considerations** should not be overlooked. Physical gold trading costs typically range from 5–20%, which directly erodes returns. Similar costs are present in Hong Kong gold prices, so investors should factor these into their decisions.

### Summary

The upward trend of gold in 2025 is driven by multiple factors: policy uncertainty, central bank accumulation, interest rate expectations, geopolitical risks, and liquidity flows. The synchronized rise of international and Hong Kong gold prices reflects a broader global asset reallocation trend. While short-term volatility is inevitable, the medium- and long-term support factors remain intact. Investors should choose participation strategies based on their risk tolerance and time horizon, rather than blindly following the market, especially during periods of intense fluctuation.