Gold Surges 66% in 2025, Posts Best Year Since 1979
Bullion tops $4,500 per ounce for the first time as central bank buying and geopolitical tensions drive the metal to its strongest annual performance in 46 years.
Gold is finishing 2025 with a 66% gain—its best annual performance since 1979.
The metal entered the year around $2,640 per troy ounce. It exits above $4,400, having touched a record high of $4,533 earlier this month. For context, gold hasn't seen this kind of move since Paul Volcker was battling double-digit inflation.
The Numbers
Gold futures settled the year around $4,475 after retreating slightly from December's record. The 66% annual gain dwarfs the average return of roughly 7% over the past two decades.
In dollar terms, gold added nearly $1,800 per ounce this year. An investor who bought $10,000 in gold on January 1 holds $16,600 today.
The metal outperformed the S&P 500, Nasdaq, and every major equity index. It even beat silver on a percentage basis, despite silver's wild run to $80.
What Drove the Rally
Three forces pushed gold to new highs.
Central banks kept buying. China, Russia, India, and several emerging market nations added to reserves throughout 2025. De-dollarization narratives—whether overdone or not—encouraged diversification away from U.S. Treasuries.
The World Gold Council estimates central bank purchases exceeded 1,000 tonnes for the third consecutive year. That's structural demand that doesn't respond to price.
Second, real yields fell. The Federal Reserve cut rates three times in 2025, bringing the fed funds rate to 3.50%-3.75%. With inflation still above 2%, real returns on cash and bonds compressed. Gold, which pays no income, becomes more attractive when the opportunity cost of holding it shrinks.
Third, geopolitical risk remained elevated. Tensions in the Middle East, uncertainty around U.S. trade policy, and ongoing friction between major powers kept safe-haven flows elevated. Gold has always been the asset of last resort, and 2025 gave investors reasons to seek it.
China's Role
Chinese buyers played an outsized role.
Retail demand for gold in China surged as property markets struggled and equities disappointed. Chinese consumers turned to gold as a store of value when other options looked worse.
The Shanghai Gold Exchange saw record volumes in several months. Premium prices in China relative to London signaled intense local demand.
This wasn't just jewelry buying. Chinese investors accumulated gold ETFs, coins, and bars at a pace not seen since the early 2010s.
The Dollar Paradox
Gold rallied despite a relatively firm dollar.
The DXY index ended the year roughly flat after volatile swings. Conventional wisdom holds that gold and the dollar move inversely—when one rises, the other falls.
But 2025 broke that pattern. Both gold and the dollar held their ground, suggesting the drivers were more complex than simple currency mechanics.
The explanation lies in gold's dual role. It's both an anti-dollar asset and a safe haven. This year, safe-haven demand dominated.
Mining Stocks Lagged
Gold equities didn't keep pace with the metal.
The VanEck Gold Miners ETF gained roughly 35% in 2025—strong in absolute terms but well below gold's 66% advance. The typical mining stock amplifies gold moves, so underperformance stands out.
Rising costs hurt. Labor, energy, and equipment expenses climbed faster than gold prices for much of the year. Margins improved in the fourth quarter as gold accelerated, but full-year results disappointed.
Some analysts argue miners remain undervalued relative to bullion. If gold holds these levels, mining stocks could catch up in 2026.
What the Skeptics Say
Not everyone is convinced the rally has legs.
Bears point to the speed of the move. A 66% gain in a single year creates technical conditions ripe for pullback. Gold hasn't sustained this kind of momentum historically.
The Fed could also disappoint. If inflation reaccelerates, forcing rate hikes in 2026, real yields would rise and gold would face headwinds.
And if geopolitical tensions ease—a big if—safe-haven demand could moderate.
2026 Outlook
Wall Street's gold forecasts vary widely.
Bulls target $5,000 or higher, citing continued central bank buying, potential dollar weakness if the Fed cuts further, and structural demand from emerging markets.
More cautious analysts see consolidation around $4,000-$4,500, arguing that much of the bullish case is already priced in.
The consensus, to the extent one exists, expects gold to outperform cash and bonds but perhaps not repeat 2025's extraordinary gains.
The Comparison to 1979
Gold's last 60%-plus year came during a very different environment.
In 1979, inflation was running near 13%. The Fed was about to embark on aggressive tightening under Volcker. The Iranian hostage crisis had just begun.
Today's backdrop is calmer. Inflation has fallen from its 2022 peaks. The Fed is cutting, not hiking. Yet gold has rallied anyway.
That suggests the metal's role is evolving. It's not just an inflation hedge anymore—it's a bet on monetary uncertainty, geopolitical instability, and the long-term trajectory of fiat currencies.
Gold's best year in nearly half a century sends a message. Investors want protection, and they're willing to pay for it.