This Is The Key Reason For Gold Prices To Rise In 2025: Read By Investing.com

According to Citi, the shift in gold ETF flows will be a critical driver of gold price growth in 2025.

After a prolonged period of inventory reduction, Citi analysts expect a significant recovery in the physical-backed gold ETF market, which has historically played a key role in boosting gold markets.

In its recent note, Citi points out that the multi-year cycle of gold ETF outflows, which saw a loss of around 930 tonnes of bullion from November 2020 to May 2024, has likely come to an end.

Analysts forecast a reversal, with gold ETFs expected to contribute to net demand of 275 tonnes by 2025, compared to net sales of 250 tonnes in 2023. This swing represents a substantial change in gold market dynamics.

Citi points out that gold ETF inflows are key to price growth, especially as other factors such as China’s gold consumption slows and official sector purchases may moderate in the second half of 2024.

Analysts say this renewed interest in gold ETFs could push prices to $3,000 an ounce by mid-2025, supported by factors such as potential Fed rate cuts, increased risks of a US recession and increased market volatility.

Historically, robust inflows of gold ETFs have been a hallmark of past gold bull markets, including the post-financial crisis rally and the 2019-2020 price rally.

Citi estimates that ETF demand’s share of gold mine supply will increase from 1% in 2024 to 7-7.5% by 2025. This growth, although modest compared to other components of demand such as jewelry or purchases from the official sector, marks a significant change in the market. , with gold ETFs poised to absorb rather than supply physical stocks.

Citi’s analysis highlights the importance of ETF flows as a key factor in the anticipated rise in gold prices, suggesting that the period ahead could see a substantial major market driven by this renewed investment interest.