Gold Prices Continue to Surge: Goldman Sachs Forecasts $3100 by Year-End Due to Central Bank Demand

Goldman Sachs predicts a 9% rally in gold prices driven by increasing central bank demand and lower fund interest rates, with gold ETFs also showing growth.

Goldman Sachs has revised its year-end gold price forecast to $3100 per ounce, driven by robust and ongoing demand from central banks. According to a report published on February 17, 2025, by Reuters, the financial institution pointed out that central banks have a structural need for gold, which is expected to push prices up by another 9% by the end of the year. The forecast also highlighted that with declining interest rates, gold exchange-traded funds (ETFs) are likely to experience a gradual increase in holdings.

As of now, the price of gold in New York has reached an all-time high of $2906 per ounce, maintaining a streak of 7 consecutive weeks of gains. The growing demand from central banks is helping push gold to its historic levels, and Goldman Sachs projects the price could continue rising.

Goldman Sachs also acknowledged the possibility of downward pressure on prices if the uncertainty driving gold prices were to subside, potentially normalizing investor positioning. Despite this, the bank anticipates that gold prices could surge to as high as $3300 per ounce by the end of 2025, mainly due to persistent policy uncertainties, including concerns over tariffs.

The report further raised the central bank's gold demand estimate, now projecting monthly purchases between 41 and 50 tons, up from the previous estimate of 70 tons per month. Should investment positioning normalize, the gold price could rise to $3200 per ounce by December, Goldman Sachs predicted.

However, if the Federal Reserve manages to keep interest rates stable, the gold price may settle around $3060 per ounce by the end of 2025. The bank reaffirmed its "gold buy" recommendation, emphasizing that despite potential short-term price drops due to reduced uncertainty, gold remains a strong hedge against long-term risks.

Goldman Sachs also noted that gold's potential to rise is bolstered by several macroeconomic factors, such as growing fears of trade tensions, the threat of a U.S. economic slowdown, and the risk of financial crises. In particular, as concerns over the sustainability of the U.S. fiscal situation grow, gold prices could rise to $3250 per ounce, reflecting an additional 5% gain.

With increasing worries about inflation and fiscal risks, speculative positions and ETF inflows are expected to continue. Central banks, particularly those holding large amounts of U.S. Treasury bonds, may increase their gold purchases to mitigate risks stemming from U.S. debt sustainability concerns.