How high can gold go this year?

After a brilliant year of gains for gold in 2024, the precious metal has hit all-time highs to kick off 2025.

But as gold approaches the $USD3000 mark, questions are rising as to how much farther it can go, and how much investors should allocate to the yellow metal.

First, how far could gold go this year?

The market no doubt understands that physical gold currently enjoys a slew of tailwinds, and its price reflects that sentiment.

Gold's surge this past month is likely also supported by a degree of momentum and enthusiasm among gold investors.

Certainly, with the right mix of volatility and continued demand, there is very little preventing gold from breaching $USD3000 per ounce very soon. If we continue to see extended volatility, worsening geopolitics, and rising inflation concerns, gold could hurtle toward $USD3200 before the end of the year.

However, this is not our base case. Any large rise in in the gold price over $USD3000 may not be sustainable.

In the near term, $USD3000 remains a key technical level - or mental barrier - for gold investors.

The precious metal is likely to be rangebound, trading at or around $USD2900 until further catalysts emerge.

We think much of the volatility and uncertainty circulating the market has been priced into gold.

That does not mean investors should exit their gold positions in pursuit of risky returns. At Global X, we have long viewed gold as the ultimate hedge against volatility-an "insurance policy" that stabilises portfolios in uncertain times. Our recommendation is to allocate 5% to 10% of a portfolio to gold and hold it as a long-term diversifier, no matter the market conditions.

Given today's environment of rising geopolitical tensions, persistent economic uncertainty, and strong market momentum, gold's role as a portfolio mainstay has never been more relevant.

Rather than cut exposure, investors may find allocating toward the higher end of the range-closer to 10%-particularly attractive. After all, there's nothing wrong with securing a little extra "insurance" when uncertainty is the dominant theme-something the market appears to be acknowledging now.

Price forecasts and allocation aside, just what has caused this ceaseless rally in gold over the past year? Well, it begins in 2024, where gold did as gold should do-rally in the face of uncertainty. With a tumultuous US election looming, central banks and investors rushed into the metal, pushing prices to a record $USD2780 per ounce.

But after Trump's victory, risk appetite surged. Markets bet that, despite his unpredictability, policy clarity would emerge. Investors rotated into big tech, crypto, and AI, leaving gold behind.

Fast forward to 2025, and that confidence has evaporated. Trump's early weeks in office have been anything but comforting to investors. His abrupt tariff threats, erratic enforcement, and divisive foreign policy have reignited uncertainty.

Meanwhile, the AI boom has hit a snag as DeepSeek's rise challenges US dominance, and yet China teeters on the brink of deflation. The "smooth sailing" many had priced in never materialised. In response, investors are reversing course, piling back into safe haven assets like gold.

With bonds delivering volatility instead of stability and private markets locked behind institutional barriers, gold has emerged as the rare asset that offers both liquidity and protection.

On the other hand, a deeper, structural shift is also unfolding. Global polarisation is driving demand and supporting the gold price at the central bank level.

Non-US-aligned nations have scaled back US Treasury purchases, opting instead for financial independence through gold.

For instance, China's central bank, a key player in this trend, resumed gold buying in December after an 18-month spree. Other nations, including India and Poland, are following suit.

For investors keen on gaining exposure to gold, gold ETFs can offer a more convenient and liquid way to invest in gold than buying bars of bullion. ETFs can be bought and sold like stocks, providing immediate access to the gold market without the need for physical storage.

Gold ETFs typically have lower costs compared to physical gold, as they eliminate the need for storage and insurance, and physically buying gold can often trigger sizeable transaction costs.

And gold ETFs can be part of a diversified portfolio, offering investors exposure to the precious metal, which could become even more valuable in 2025.

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