Why do gold prices continue to rise?

At the beginning of 2025, expectations were that gold prices would rise to $3,000 per ounce and potentially soar above $3,500 as well. However, as things stand, prices have currently exceeded this level to reach more than $3,900 per ounce for the first time. Consumers continue to demand this safe metal amidst the financial crisis plaguing the US government, along with increasing expectations of further interest rate cuts by the Federal Reserve.

US gold futures contracts for December delivery have risen to $3,926.80 per ounce, with an additional 25 basis point rate cut expected in the coming period.

This is compounded by economic uncertainty regarding the resolution of the US government financial crisis and the growing interest of individual investors in hedging amidst trade and geopolitical tensions. There is a high demand for gold in local and regional markets among citizens and expatriates.

This is driven by several factors related to economic, cultural and social motivations. Asian people consider gold a means of savings and a symbol of social status, as it is used on special occasions and paid as dowry at weddings and religious celebrations, especially in India. In terms of long-term investment and savings, people view gold as a safe means of preserving value, especially in light of currency fluctuations or inflation in their home countries.

This motivates them, especially expatriates, to purchase gold at reasonable prices and keep it until their final return home.

The region's countries are among those that offer gold at competitive prices, meaning they are exempt from taxes on gold compared to other countries.

The ease of reselling or converting this metal is also very easy in the Sultanate of Oman and the region, as anyone can liquidate it and sell it at almost any time at the market price. Expatriates can also convert gold into cash during difficult times, or convert it into jewellery and dowries upon returning home.

The daily monitoring of gold shops in the Omani market contributes to trust and transparency, as they are subject to official monitoring to ensure that this metal is free of fraud or deception, unlike some markets in their home countries.

This metal also holds great importance today among Omani citizens, especially during social occasions such as weddings and banquets. However, large-scale gold purchases are made by expatriates from South Asia due to their cultural and economic connection to gold.

Overall, the sharp rise in gold prices in 2025 is attributed to several factors, most notably global economic and political uncertainty, people's tendency to hoard the metal and growing concerns about weak growth, sovereign debt, geopolitical tensions and even fears of a "sudden financial crisis", which could contribute to increased demand for gold.

As is well known, gold does not provide returns like bank interest or bonds, so when "real" interest rates (after accounting for inflation) are low or negative, investors are increasingly drawn to gold as a means of preserving value.

There are expectations that the US Federal Reserve may cut interest rates in the coming period, which supports the demand for gold. High interest rates increase the cost of holding gold, so any decline in interest rates alleviates this burden. Finally, many transactions in the gold market are conducted in dollars and if this currency weakens against other currencies, gold becomes cheaper for buyers with other currencies, increasing demand for it.