Goldman Sachs tips gold to hit US$3,700/oz as central banks and investors drive demand

Investment bank and financial services company Goldman Sachs is forecasting gold will reach US$3,700 per troy ounce by the end of 2025.

Goldmans said in a recent note that gold would continue its recent run of record prices and continue to climb on the back of renewed appetite from investors and a long-term structural shift in demand from central banks.

Goldman Sachs Research commodities strategist Lina Thomas said uncertainty over the Trump administration’s tariffs on major trading partners had also been and would continue to be a major factor.

Economic concerns

Ms Thomas believes demand from central banks, particularly those in emerging markets, will further boost gold prices in the longer term.

“Since March, investors have been increasing their [gold] holdings, driven by concerns about the health of the economy and market volatility,” she said.

“Whenever there’s a lot of uncertainty, traders temporarily park their money in gold; when there’s clarity, gold prices tend to drop again because traders know what to do with their money,” Ms Thomas said.

Russia-Ukraine impact

Ms Thomas said Russia’s invasion of Ukraine and, in particular, the freezing of Russia’s foreign assets by western countries marked a major turning point for these institutions, whose gold purchases have increased fivefold since 2022.

“Developed market central banks tend to have larger gold holdings, partly as a legacy of the gold standard era when sovereign money supplies were linked to the commodity, leaving them with a higher proportion of their reserve assets in gold,” Ms Thomas said.

“China holds less than 10% of its reserves in gold, compared with about 70% or more for the US, Germany, France and Italy—the global average is roughly 20%, which we view as a plausible medium-term target for large emerging central banks,” she said.

ETFs growing in importance

While Goldman Sachs believes that central bank purchases have been the primary factor driving up gold prices in recent years, growing exchange-traded fund (ETF) holdings are also beginning to feed into the mix as they tend to do when recession fears grow.

On a positive note, the bank suggests a US recession looks less likely now given signs of progress on trade policy negotiations, with the company’s economists assessing the chance of a US recession in the next 12 months at 35%, down from 45% previously.

In the event of an economic downturn, however, Goldmans sees the price of gold moving as high as US$3,880/oz.