Gold Could Reach $3,000/toz by End of 2025, Says Goldman Sachs

Goldman Sachs's latest forecast suggests that by the end of 2025, gold prices will rise by 11% to $3,000 per ounce.

Gold has been one of the best-performing precious metals this year, but it has experienced volatility following Trump's election victory. Goldman Sachs noted that despite some recent headwinds that have dampened the momentum of gold's explosive rise, the firm has further raised its target price this week.

For instance, gold usually suffers when the US dollar strengthens, as is currently the case. The US Dollar Index has risen sharply since last October, having risen nearly 6% so far this year.

In its latest report on Wednesday, Goldman Sachs wrote: We push back on the common argument that gold cannot rally to $3,000/toz by end-2025 in a world where the dollar stays stronger for longer.

Goldman Sachs believes the first factor driving gold prices higher is the policy action of the Federal Reserve, which is also a key factor propelling gold prices.

The firm predicts the Fed will significantly cut interest rates in 2025, making Goldman Sachs one of the most optimistic forecasters on Wall Street. The firm explained that since gold does not generate interest, it struggles to compete with interest-bearing assets when interest rates are high. This dynamic changes as borrowing costs decrease.

"In our base case, we see a 7% boost from 125bp of additional Fed cuts to the end-2025 gold price."

"A higher for longer federal funds rate is the main downside risk to our $3,000/toz forecast. For instance, if the Fed cut by an additional 25bp only (which would likely also strengthen the dollar), we estimate that the gold price would rise to only $2,890/toz by end-2025."

Secondly, a strong US dollar will drive a wave of gold purchases led by central banks.

Goldman Sachs noted that since 2022, foreign institutions have been the main source of demand, following US restrictions on Russia that sparked a scramble for alternatives to the US dollar reserves. Many countries have taken the West's sanctions on Russia as a signal to diversify away from US dollar reserves, thereby increasing central bank purchases of gold.

The firm believes this trend will continue, expecting foreign banks to increase their gold purchases by 30 tons per month by 2025 — structurally higher than the purchases before Russia faced sanctions.

Although an appreciating US dollar may force some emerging markets to continue holding US dollar reserves, Goldman Sachs expects larger central banks to mitigate the weakness of their local currencies by buying more gold.

Thirdly, gold and the US dollar are common reasons for the rise in 2025.

While gold prices usually soften when the US dollar strengthens, this is typically because the US dollar reflects economic strength. But this time, the appreciation of the US dollar is due to "international issues."

Goldman Sachs stated: "When trade tariffs — a key factor in our foreign exchange strategists' forecast for a strong US dollar outlook in 2025, or broader geopolitical shocks drive the US dollar higher, the US dollar and gold prices tend to rise together."

"Key buyers like China, with large dollar reserves and a long-run strategic interest in diversification, may even increase gold demand during periods of local currency weakness to boost confidence in their currency," the firm added.