Closing a year described as one of the most brilliant in the history of precious metals markets, gold delivered an exceptional performance in 2025, achieving a record annual return of 67%—a level unseen in decades. December alone contributed approximately 4% to the gains, pushing gold to its 53rd all-time high of the year at $4,449/oz on December 23, before closing the year near $4,368/oz.
According to the analytical report from the World Gold Council, this meteoric rise was not coincidental but driven by a complex mix of factors, including sustained central bank purchases, tariff and trade risks, robust options market activity, and a weakening U.S. dollar.
A Year of Record Highs and Key Drivers
In 2025, gold recorded 53 new all-time highs, with the last peak occurring on December 23. This performance was not limited to USD pricing; gold also reached record highs across all major currencies, benefiting from relative stability in foreign exchange markets despite variations in annual returns.
Regarding December’s surge, the Gold Return Attribution Model (GRAM) highlighted intense activity in the options market—reflecting elevated risk and uncertainty—as the primary driver, followed by U.S. dollar weakness, particularly versus the Chinese yuan, which appreciated 1.2%.
Over the entire year, the model explained around 60% of the annual return through identifiable factors, led by geopolitical risks and options market activity, especially from August to October, alongside declining bond yields that provided additional support.
The report notes that the residual component not explained by the model largely reflects persistent and unprecedented central bank demand, considered a structural market feature rather than a model shortcoming.
Liquidity Returns: ETFs and Futures
The report also highlighted a notable shift in investor appetite, with gold ETFs recording inflows for the seventh consecutive month in December, led by North American funds.
In the futures market, managed money positions increased, with net long positions rising by $11 billion (approx. 59 tons) in December. Over the full year, the nominal value of positions grew by $8 billion, even as actual tonnage declined by 173 tons, reflecting the impact of rising prices on trading volumes.
“Thunder in Precious Metals”: Gold Stands Out
Describing the December surge as historic in scale but uneven in nature, the report noted that silver and platinum experienced sharp gains driven by supply constraints and policy interventions, while gold’s ascent remained more measured and stable.
Tariff uncertainties and trade tensions prompted investors to accelerate physical bullion purchases, creating backwardation and inflating regional premiums, particularly in silver and platinum. China’s announcement on December 27 of export licenses for silver further intensified market pressures.
Notably, gold showed no signs of such a squeeze. When markets began correcting late in the month due to raised margin requirements at the CME, silver, platinum, and palladium experienced intraday ranges exceeding five times their 2025 average, while gold’s range was only three times the average, signaling deeper liquidity and fundamentally different market drivers.
Geopolitical Role: Gold Replaces the Dollar as the Safe Haven
The report emphasized gold’s geopolitical significance, citing events such as U.S. actions in Venezuela as evidence that gold has become the preferred global safe haven.
Analysis indicates a shift compared to pre-2022 patterns. While the U.S. dollar was previously the main beneficiary of geopolitical shocks, current data shows that every 100-point rise in the Geopolitical Risk Index translates into an immediate 2.5% increase in gold prices, reflecting a structural change in investor behavior.
Outlook for 2026
The report identifies several key paths for the year ahead:
U.S. Supreme Court Tariff Decisions: Markets await rulings on IEEPA-related tariffs in early 2026. Confirmation of tariffs would reinforce policy risk and support gold, while restrictions could redirect focus toward fiscal deficits—either scenario being potentially supportive for gold.
Inflation Risks: While the current environment shares some features with the late 1990s (tech-driven growth and rate-cut expectations), inflation expectations today are significantly higher, offering a supportive medium-term backdrop for gold.
Decoupling from Short-Term Volatility: Gold is expected to shed the temporary effects of silver and platinum fluctuations once index rebalancing concludes in January, refocusing on its core drivers: central bank demand, hedging from uncertainty, and portfolio diversification.
Conclusion
The World Gold Council concludes that gold’s resilience—rooted in macroeconomic concerns and structural demand—is set to reassert itself once speculative distortions in other precious metals markets subside. With its core drivers intact, gold is well-positioned to regain its leadership in the precious metals sector in 2026.
The report also emphasizes that frequent, globally impactful geopolitical events, while often short-lived, have elevated investor anxiety and risk premia—conditions from which gold has consistently benefited. There are a few indications of a near-term change in this status quo.
Follow the latest news on Google News
