Gold's Record Rally Predicted by Goldman Sachs for 2025

Gold has been making significant waves in the market this year, hitting successive records only to experience a pullback after Donald Trump's White House win. However, Goldman Sachs Group Inc. believes that gold will continue its upward trajectory and reach a record next year. Analysts like Daan Struyven have reiterated a target of $3,000 an ounce by December 2025, citing the structural driver of higher demand from central banks and the cyclical lift from flows to exchange-traded funds as the Federal Reserve cuts rates.

Unlock the Potential of Gold with Goldman Sachs' Forecast

Central Bank Buying: A Key Driver

Gold's rally is being strongly supported by increased official-sector buying. Central banks around the world are recognizing the importance of gold in their reserves and are actively increasing their holdings. This demand from central banks provides a solid foundation for the continued growth of gold prices. Additionally, the Federal Reserve's pivot to easier policy is expected to lead to increased flows to exchange-traded funds, further fueling the upward movement of gold.

For example, in recent years, many central banks have been diversifying their reserves by adding gold. This trend is expected to continue as they seek to hedge against economic uncertainties and currency fluctuations. The increased demand from these institutions is a significant factor contributing to the bullish outlook for gold.

Trade Tensions and Speculative Positioning

An unprecedented escalation of trade tensions between major economies could have a significant impact on gold prices. Speculative positioning in gold may revive as investors seek safe-haven assets in times of uncertainty. The potential for disruptions in global trade flows and the associated economic risks could drive investors towards gold, boosting its demand and prices.

Take, for instance, the current trade disputes between the US and China. These tensions have created an atmosphere of uncertainty in the global markets, and gold has emerged as a preferred asset for many investors. The possibility of further trade restrictions and their impact on various sectors can lead to increased demand for gold as a store of value.

US Fiscal Sustainability and Central Bank Actions

Rising concerns over US fiscal sustainability are also likely to support gold prices. Central banks, especially those holding large US Treasury reserves, may opt to buy more of the precious metal as a way to diversify their holdings and protect against potential risks. This increased demand from central banks can have a positive impact on gold prices.

Moreover, the new US administration's policies and actions can further influence gold prices. For example, if there are any developments related to trade sanctions or geopolitical tensions, it can lead to a flight to safety and a surge in demand for gold. The potential for such events makes gold an attractive investment option in the current economic climate.

In other outlooks, Brent crude is expected to trade between $70 and $85 a barrel next year, with near-term upside risk if the Trump administration tightens sanctions on Iran. Base metals are favored over ferrous, and European gas faces upside risks in the short term due to the weather.For farm goods, Goldman Sachs is closely monitoring the potential fallout from possible tit-for-tat trade measures between Washington and Beijing during Trump's tenure. Higher China tariffs on US agricultural goods and meat could reduce demand for US exports, and rebalancing the US market may require lower US soybean/corn/meat prices.