Gold Surges 23% This Year, Banks Raise 2025 Targets

Gold has emerged as the standout asset of the year, with its price surging by nearly 23% since the beginning of the year, outperforming other financial products. This upward trend is expected to continue, driven by weak U.S. economic data and escalating trade tensions, which are fueling economic uncertainty and prompting investors to flock to safe-haven assets.

Goldman Sachs, in a report released last Friday, raised its 2025 target price for gold from $3,300 to $3,700 per ounce, marking a 12% increase and the most aggressive upward revision by the firm this year. In February, Goldman Sachs had forecasted a year-end gold price target of $3,000 per ounce, which was subsequently raised to $3,300 by the end of March.

The firm highlighted that central banks continue to show strong demand for gold, and funds are flowing into gold ETFs. Despite some investors liquidating speculative gold positions during the market's sharp decline earlier this month, concerns over an economic recession have driven the total holdings in gold ETFs higher. Additionally, physical gold demand from Asia has supported prices.

Other major banks have also revised their gold price forecasts upward. UBS raised its target to $3,500 per ounce, citing declining demand for U.S. Treasuries and the dollar, which is expected to sustain gold's upward momentum into next year and keep it at elevated levels for an extended period. UBS analyst noted that in an environment marked by escalating tariff uncertainty, slowing economic growth, rising inflation, and persistent geopolitical risks, the rationale for increasing gold allocations is stronger than ever.

Deutsche Bank also raised its target to $3,700 per ounce by 2026, up from a previous forecast of $2,900 per ounce.

Analysts are closely monitoring U.S. macroeconomic data, noting that the economy showed signs of slowing even before tariffs were implemented. Over 497,000 workers were laid off in the U.S. during the first quarter, the highest since 2009 and a 93% increase from the first quarter of 2024. Manufacturing and service sector activities have also weakened, with the ISM Manufacturing Index falling from 50.9 in December to 49 in March, and the Services Index dropping from 54 to 50.8. An index below 50 typically indicates economic contraction.

The Atlanta Federal Reserve's forecasting tool predicts that U.S. GDP growth for the first quarter will be -2.4%, although this figure may change. However, GDP growth is likely to be significantly lower than the 3% recorded last summer. Many economists have warned of the possibility of stagflation and expressed concerns that the U.S. could fall into a recession. Gold's safe-haven status is being amplified in the current environment, particularly as trade wars have diminished the appeal of U.S. Treasuries and the dollar.