- Goldman Sachs expects gold to reach $3,000 an ounce by the end of 2025.
- The metal's rally has wavered as the dollar gained ground since Donald Trump's election.
- But there are three reasons gold can keep rising, even if the dollar stays strong.
Goldman Sachs sees gold rising 11%to $3,000 an ounce by the end of 2025.
The bank doubled down on its forecast this week despite emerging headwinds that have chipped away at the precious metal's blowout rally. Gold—one of this year's top performers—wavered in recent months as competing assets have risen under Donald Trump's election.
For instance, gold typically suffers when the US greenback strengthens, as is happening. The US dollar index is up nearly 6% year-to-date, having risen sharply since October.
"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," it wrote on Wednesday.
The first factor it sees driving gold higher is Federal Reserve policy action, which is the key input for the commodity.
Goldman has predicted significantly lower interest rates in 2025, and the bank is among Wall Street's most dovish forecasters. It expects the fed funds rate to drop over 100 basis points to the 3.25%-3.5% range next year. Since gold doesn't yield interest, it struggles to compete against interest-bearing assets when rates are high. This dynamic shifts as borrowing costs fall.
"In our base case, we see a 7% boost from 125bp of additional Fed cuts to the end-2025 gold price," Goldman said. "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."
The bank previously said that gold-backed ETFs rise gradually over six months after rate cuts occur. The metal will rally as rising ETF demand ramps up pressure on gold's limited supply.
Second, a stronger dollar will boost the gold-buying spree led by central banks.
Foreign institutions have been a chief source of demand since 2022, after US restrictions on Russia prompted a race for dollar-reserve alternatives. Many countries viewed Western sanctions on Moscow as a cue to diversify away from the greenback, bolstering central bank purchases of gold.
Goldman previously outlined that the trend will continue, expecting foreign banks to add 30 tons of gold per month through 2025 — structurally higher than the amount bought before Russia faced sanctions.
Though an appreciating dollar could pressure some emerging markets to keep hold of their dollar reserves, Goldman expects larger central banks to boost their currency weakness with more gold buying.
"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," analysts wrote, citing that this is exactly what happened during previous instances of yuan weakness.
Third, gold and the dollar have a shared reason for rising in 2025.
Though gold typically softens when the dollar rises, that's usually because the greenback is reflecting economic strength. But this time around, the dollar is rising on international issues, and not from expectations for higher interest rates.
"When trade tariffs — a key feature of our FX strategists' 2025 stronger for longer dollar outlook — or more broadly geopolitical shocks drive dollar strength, the dollar and gold prices tend to rise together," Goldman said.
Rising uncertainty around geopolitics and equity market risk can be a boon to both assets, which are considered premier safe-havens.
"We estimate that tariff shocks—measured as a $10bn increase in expected US tariff revenue in 2019— boosted gold prices (0.4%) and the dollar TWI (0.3%) on heightened uncertainty and stronger US terms of trade, respectively," analysts said.