Gold Demand Surges 1,000 Tons as US Dollar Concerns Rise

Goldman Sachs has noted a substantial increase in gold demand from both central banks and investors, primarily due to worries about the US dollar's safety. This trend has resulted in a swift rise in gold acquisitions, with central banks purchasing over 1,000 tons of gold for the third consecutive year in 2024. The investment bank has adjusted its year-end 2025 gold target to $3,100, reflecting the heightened demand for gold as a safe-haven asset.

Daan Struyven, co-head of global commodities research at Goldman Sachs, highlighted that global economic uncertainty is fueling fears of a weakening US dollar, which in turn is driving higher demand for gold. In a recent interview, Struyven mentioned that many investors and central banks are increasingly turning to gold as a safe-haven asset amidst ongoing trade tensions and economic uncertainties. The broader driver behind this trend is the uncertainty and downside risks to the US and global economic outlook, which is supporting gold prices while pushing down more procyclical commodities closely tied to US growth, such as oil.

Struyven also noted that gold may reach as high as $3,300 this year due to investor fears of a weakening US dollar. The investment bank's base case forecast for year-end is $3,100 per ounce, but they believe the risks to this forecast are skewed to the upside. This is supported by the fact that investors and ETF holdings have significantly increased, adding 100 tons of demand over the last month. Central bank buying continues to be robust, with January's purchases being seven times higher than the pre-2022 average. Central banks worldwide are expressing concerns that the dollar and Treasury holdings may not be safe, leading to a shift towards gold.

Historically, high interest rates and a strong US dollar would typically deter investors from gold. However, the current economic climate has seen gold prices rise despite these factors, indicating a broader shift in investor sentiment. The US dollar's status as a safe-haven currency is being questioned, leading investors to seek alternative stores of value. Central banks, in particular, have been aggressive in their gold purchases, a trend expected to continue as countries look to diversify their reserves and reduce reliance on the US dollar. The demand for gold is also fueled by geopolitical uncertainties and the potential for further trade disruptions, making gold a more stable and reliable asset in an increasingly volatile global market.

The rapid gold demand from central banks and investors underscores the growing concerns over the US dollar's stability. As trade tensions and economic uncertainties persist, gold is likely to remain a favored asset for both institutional and individual investors. This trend highlights the importance of diversification in investment portfolios and the need for safe-haven assets in times of market volatility. The current gold price is $2,994 per ounce, reflecting the ongoing demand and investor sentiment towards the precious metal.