In the latest report, Lina Thomas - an analyst at Goldman Sachs Research predicted that gold prices will increase by 8% in 2025, reaching an all-time high of 3,100 USD/ounce. Previously, the analysis team only predicted that gold prices would reach $2,890/ounce.
The new forecast is being raised by higher-than-expected demand for gold from central banks, especially after the Russian central banks assets were frozen in 2022, Goldman Sachs wrote.
In addition to strong demand from central banks, Goldman Sachs Research also expects capital flows into gold ETFs to increase as interest rates fall, making gold more attractive to investors.
However, this factor may be somewhat affected by speculators reducing their net buying position in the gold futures market. Currently, net buying position is still very high as concerns about prolonged tariffs from the US President Donald Trump administration force investors to seek safe-haven assets such as gold, said an expert at Goldman Sachs.
However, uncertainty related to tariffs, geopolitical risks or concerns about government debt levels may cause speculators to continue to increase their buying position. This scenario could push gold prices to $3,300 an ounce by the end of 2025, Thomas wrote in the report.
The main driver behind Goldman Sachs' gold price forecast is still net demand from central banks, as December 2024 figures continue to exceed expectations.
Before the Russian central banks assets were frozen in 2022, the average monthly demand for gold on the London OTC market was just about 17 tons. But in December last year, that number was 108 tons, Thomas noted.
According to her estimate, central bank demand for gold in the London OTC market has increased fivefold after the freeze on Russian assets. Therefore, Goldman Sachs has adjusted its central bank demand forecast for gold in the new valuation model.
Thomas said that if central bank demand continues to remain high, gold prices could increase by 9% this year.
Goldman Sachs economists also predict that the US Federal Reserve (FED) will cut interest rates twice this year, creating more momentum to support gold prices - a non-interest-bearing asset.
These two factors will overshadow the negative impact of speculators reducing their net buying position in the gold market for the future, the report said. The net buying position of speculators is currently very high due to safe-haven demand, but this may not last long if the market becomes more stable in terms of economy and politics.
Despite the risk of a short-term correction when net buying returns to normal, Goldman Sachs still predicts that gold prices will tend to increase this year.
The report also listed a number of factors that could cause gold prices to fall below or above the forecast of $3,100/ounce by the end of the year.
In general, risk factors are leaning towards an upward trend. If policy uncertainty remains high or tariff concerns continue to driving demand for safe-haven assets, gold prices could reach $3,300/ounce by December 2025, the research team wrote.
We also see the risk of price increases if central bank demand exceeds expectations due to policy uncertainty in the US, Thomas wrote. If central banks buy an average of 70 tons of gold per month, gold prices could reach $3,200/ounce by the end of 2025.
Sime, if concerns about rising US government debt are raised, central banks holding large US Treasury bonds could buy more gold, attracting capital into gold ETFs, pushing prices up by another 5% to $3,250 an ounce by the end of the year, the report said.
On the other hand, gold prices could fall below forecasts if the Fed does not cut interest rates as expected. If the Fed keeps interest rates unchanged, we expect gold prices to reach only $3,060/ounce by the end of 2025, the analysis team said.
