• The U.S. dollar climbed following a hawkish forecast delivered by the U.S. Federal Reserve on Wednesday — while gold prices dropped. Values of the two tend to have an inverse relationship.
• Despite the potential for a stronger greenback in 2025, analysts told CNBC that gold prices would find strong support from factors including central bank and Chinese demand, along with wider geopolitical tensions.
• "Trump tariff proposals and a more hawkish Fed do add to the downside risk for gold. All else being equal that would lead to lower gold prices. But we expect non-traditional factors to be stronger next year," one economist said.

The U.S. Federal Reserve jolted markets with an unexpectedly hawkish set of projections for the path of interest rates next year, setting gold prices up for a blow — but analysts told CNBC they still see solid support for the precious metal in 2025.

The Fed's "dot plot," a gauge of policymakers' outlook, now suggests the Fed will cut interest rates twice in 2025, compared with four quarter-point cuts previously expected in September, when concerns about the weakening labor market were front-of-mind. The big concern for the central bank is now whether the policies of incoming President-elect Donald Trump — particularly his threat of sweeping trade tariffs — will prove inflationary.

The U.S. dollar jumped following the Fed news on Wednesday, with the dollar index hitting a two-year high, as the potential for higher rates was seen boosting the currency. Gold prices — which have been on a stunning run and scaled record highs this year — meanwhile tumbled 2% to their lowest level in a month.

Gold is widely denominated in dollars, with a stronger greenback weighing on prices for the precious metal. Higher interest rates and higher U.S. Treasury yields also traditionally increase competition for the safe-haven asset, dampening gold demand.

But these relationships have been "on and off" for the last few years, as wider factors such as demand for gold from central banks — particularly that of China — has outweighed dollar and U.S. Treasury moves, according to Hamad Hussein, commodities economist at Capital Economics.

"Trump's tariff proposals and a more hawkish Fed do add to the downside risk for gold. All else being equal, that would lead to lower gold prices. But we expect non-traditional factors to be stronger next year," he told CNBC by phone.

China plays the biggest part in that in Hussein's view. The central bank of the world's second-largest economy has resumed gold purchases, while a weak macroeconomic outlook — especially in a potentially escalating U.S. trade war — is driving safe-haven demand among local investors. Overall, since the outbreak of the Russia-Ukraine war in 2022, central banks from Poland to India have also increasingly favored gold purchases, he added.

"As a result, gold prices are likely to remain close to their record highs over the coming year," Hussein said.

Crypto competition

Janet Mui, head of market analysis at RBC Brewin Dolphin, also said that gold prices would continue to find support next year.

"At the margin, a more hawkish Fed, stronger U.S. dollar and higher real yields are near-term negative for gold. This is particularly true after a strong rally of gold prices this year and rising appeal of crypto as a digital store of value," Mui said by email.

"That said, we think some structural and cyclical support for gold will remain relevant," Mui continued.

"These include emerging market central banks' desire to raise gold as a percentage of reserves and a place in portfolio as hedge against various macro risks. We remain overweight in gold as diversifier against our overweight position risk assets," she added.

Debate has rumbled for years whether cryptocurrencies such as bitcoin could replace gold as the leading "store of value" asset, with skeptics arguing the crypto assets lack the stability of the metal.

Both have theoretical appeal as a refuge from wider geopolitical and market volatility, though this has not always borne out for crypto prices.

Geopolitical tensions going into 2025, along with foreign-reserve diversification by central banks and the fact that interest rates will likely continue to move lower, are creating a "perfect storm for gold" said Ewa Manthey, commodities strategist at ING.

"Despite the pullback we've seen in gold prices following yesterday's Fed statement, we believe gold's positive momentum will continue in the short to medium term," Manthey said by email.

ING sees gold prices averaging $2,760/oz in 2025, from $2,595 at present.

Manthey nevertheless stressed that her bullishness was for the short to medium-term.

"In the longer term, Trump's proposed policies — including tariffs and stricter immigration controls, which are inflationary in nature — will limit interest rate cuts from the Federal Reserve. A stronger U.S. dollar and tighter monetary policy could eventually provide some headwinds to gold," she said.