Financial Services, December 12 (Editor Huang Junzhi) Goldman Sachs recently predicted that by the end of 2025, the price of gold will rise 11% to $3,000 per ounce.

Gold was one of the best performing precious metals this year, but it fluctuated after Trump won the election. Goldman Sachs pointed out that the bank raised its target price further this week, despite recent adverse factors weakening the blowout upward trend in gold.

For example, when the dollar strengthens, gold is usually affected, as is happening now. The US dollar index has risen sharply since October last year, and has risen nearly 6% so far this year.

Goldman Sachs wrote in its latest report on Wednesday: “We disagree with the general view that gold is unlikely to rise to $3,000 per ounce by the end of 2025 while the dollar continues to strengthen.”

Three major catalysts

Goldman Sachs believes that the first factor driving the price of gold higher is the policy action of the Federal Reserve, which is also a key factor in boosting the price of gold.

The bank predicts that the Federal Reserve will cut interest rates sharply in 2025, and Goldman Sachs is one of Wall Street's most optimistic forecasters. The bank explained that since gold does not generate interest, it is difficult for it to compete with interest-bearing assets when interest rates are high. This dynamic changes as borrowing costs fall.

“In our basic expectations, we expect the Fed to cut interest rates by a further 125 basis points, which will increase the price of gold by 7% by the end of 2025.”

“Higher long-term federal funds rates are the main downside risk we anticipate of $3,000/oz. For example, if the Federal Reserve only cuts interest rates by another 25 basis points (which may also strengthen the dollar), we estimate that by the end of 2025, the price of gold will only rise to $2,890 per ounce.”

Second, a stronger dollar will drive a boom in gold purchases led by central banks.

Goldman Sachs pointed out that foreign institutions have been the main source of demand since 2022, after US restrictions on Russia triggered competition for alternatives to dollar reserves. Many countries see Western sanctions against Russia as a sign of diversification away from dollar reserves, thereby increasing central bank purchases of gold.

The bank believes this trend will continue, and it is expected that by 2025, foreign banks will increase their monthly gold purchases by 30 tons — structurally speaking, this will be higher than before Russia faced sanctions.

Although the appreciation of the dollar may force some emerging markets to continue to hold dollar reserves, Goldman Sachs expects that larger central banks will ease the weakening of the local currency by buying more gold.

Third, gold and the US dollar have a common reason to rise in 2025.

Although the price of gold usually weakens when the dollar rises, this is usually because the dollar reflects a stronger economy. But this time, the dollar's appreciation was due to “international problems.”

Goldman Sachs said, “When trade tariffs — which are a key factor in our forex strategists forecast for a stronger dollar in 2025, or when broader geopolitical shocks drive the dollar stronger, the dollar and gold prices tend to rise at the same time.”

“Increased uncertainty about geopolitical and stock market risk, and these two may be viewed as primarySafe haven assetsThe assets are beneficial.” The bank added.