Gold Becomes the Best-Performing Asset in H1 2025
Gold has emerged as the best-performing asset in the first half of 2025, soaring more than 25% in just six months—making it the second-best first half in the past 50 years, surpassed only by the tail end of the 1980s Gold Supercycle following the collapse of the Bretton Woods system.
While most analysts and investors had anticipated a gold rally, few expected such a sharp and rapid surge.
A perfect scenario unfolded for gold in H1 2025, shaped by uncertainty around economic policy, escalating risks in the Middle East, and a weakening U.S. dollar.
Although the second half of the year may not bring a complete reversal, I believe gold price projections will become increasingly complex as supporting factors begin to wane and prices rise. Investors need to stay alert to understand where gold is headed next.
The Bull G-O-L-D Case: A Structural Shift in Market Belief
The bullish scenario is rooted in a market belief that this rally stems from structural transformation.
The biggest opportunities in the second half stem from four major structural factors summarized as G-O-L-D:
- G = Geopolitics
- O = Official Reserves
- L = Long-Term Rates
- D = De-dollarization
Data from the IMF and World Gold Council shows that the share of gold in global central bank reserves has risen from 15% in 2023 to nearly 20% this year. This clearly reflects central banks’ preference for gold as a core reserve asset amid a broader reserve system shift.
Long term, the trend of reducing reliance on the U.S. dollar (de-dollarization) has only just begun. With over 60% of many countries’ reserves still in dollars, reallocating to gold as a risk-diversification measure is likely to continue for years.
In H2, if the Fed cuts rates due to a slowing economy, gold will likely get an additional boost. This could push gold prices beyond $3,500, with a potential climb toward $4,000 per ounce—marking the steepest rise in modern financial history.
The Bear Case: When Gold Is Seen as Overvalued
The bearish case could emerge if investors start locking in profits, believing gold has outpaced its fundamentals.
Historically, over the past 50 years, gold has averaged a 2% gain in H1 and 6% in H2. When gold has surged more than 25% in the first half, such as in 1980 and 2016, both instances were followed by a 10–15% correction in the second half.
The worst-case scenario could mirror 1980, when prices surged due to Soviet-Afghan war fears and dollar instability—only to crash after the Fed raised rates.
This year, if the Fed keeps rates unchanged while inflation remains stubborn due to trade taxes, profit-taking could intensify.
We’ve seen early signs: by late Q2, the World Gold Council reported outflows from gold ETFs, and Singapore’s central bank made a net sale of 5 tons in May.
While these are initial signals, if they broaden, gold could face further pressure. A correction toward $2,800–$3,000/ozcould follow, still marking a 7–20% gain for the year.
Most Likely Outcome: A New Equilibrium Around $3,300
In my view, the most likely scenario is a new equilibrium forming around $3,300 per ounce in H2 2025.
Taking all structural, cyclical, and behavioral market factors into account, I don’t believe central bank demand has been overestimated—but higher prices will inevitably trigger profit-taking.
For example, central banks aiming to shift reserves from the dollar to gold may reduce purchases—or even sell—if gold prices rise too fast while the dollar weakens, altering reserve composition ratios.
On the monetary policy side, even if the Fed holds rates steady to watch the economy, U.S. fiscal uncertainties and an eventual economic slowdown still support a positive long-term gold outlook.
Everything now resembles a balance beam, with near-equal weights on both ends. Strategically, the $3,300 level presents both opportunity and risk in equal measure.
In the second half of 2025, gold is no longer just about whether it will go up or down. The real question is: what happens when the traditional Safe Haven becomes so expensive, it starts being seen as a speculative asset?