Goldman Sachs raised its gold price forecast again to see $3,700 by the end of the year, and may touch $4,500 in extreme cases

Against the backdrop of market volatility and rising recession risks, Goldman Sachs has recently sharply raised its gold price forecast.

In a report released on the 11th, Goldman Sachs Lina Thomas team raised the gold price target from $3,300 per ounce to $3,700 per ounce at the end of 2025, and expected a trading range of $3,650-$3,950.

The adjustment reflects larger-than-expected central bank purchases, ETF inflows from increased recession risks, and gold's unique position as a safe-haven asset.

In an extreme case, gold could even touch US$4,500/oz if central bank demand continues to rise to 110t/m, ETF holdings rebound to pandemic-era levels, and speculative positioning reaches the top of the historical range. However, such a scenario is considered a low-probability event.

 The central bank's gold purchase exceeded expectations, and the target price of gold at the end of the year was $3,700

Gold prices rebounded quickly after a brief 5% drop following the announcement of US tariffs on 2 April, largely as investors unwound their positions in response to a sell-off in equities.

However, as recession fears intensified, investors gradually resumed their gold investments, and ETF holdings rose, further fueling the recovery in gold prices. As of press time, spot gold has reached a high of $3,237 per ounce.

Goldman Sachs raised its year-end 2025 gold price forecast to $3,700/oz, an increase of $400 from its previous forecast, and the corresponding forecast range was adjusted from $3,250-$3,520 to $3,650-$3,950. This adjustment reflects a strong recovery in central bank demand. In addition, given the uncertainty of the current economy, inflows into ETFs are expected to increase further.

Goldman Sachs raised its central bank purchase forecast to 80t per month from 70t, although this figure is still below the 2022 average of 86t/m, but well above the pre-2022 baseline of 17t/m.

Central bank procurement demand has remained strong over the past few months, with Goldman Sachs' current forecast for February pointing to 106t of central bank purchases, well above the previous assumption of 70t/month. Central bank purchases have picked up markedly since November 2024 against the backdrop of heightened policy uncertainty in the US, with an average of 109t between November and February.

 The risk is biased to the upside, with gold reaching $4,500 in extreme cases

Goldman Sachs expects the Fed to cut interest rates by three 25 basis points in 2025, which is often the base factor for gold-backed ETF inflows. However, recent higher-than-expected inflows likely reflect increased demand from investors to hedge against recession risks and falling prices of risky assets. History has shown that ETF inflows tend to significantly and consistently exceed the levels implied by their Fed interest rates during periods of recession fears.

Given that Goldman Sachs economists now assess the probability of a U.S. recession in the next 12 months at 45%, they have factored this factor into ETF rate-based forecasts, adjusting for recession-related ETF excess inflows weighted by recession probability. If a recession does occur, ETF inflows could accelerate further, pushing gold prices to $3,880 an ounce year-on-year.

In the medium term, Goldman Sachs said the risks to the revised forecast remain skewed to the upside. On the central bank side, if the average monthly purchase reaches 100t/month (instead of 80t in the baseline scenario), the gold price could reach US$3,810/oz by the end of 2025.

Gold could approach US$4,500/oz by the end of 2025 amid extreme tail risk scenarios such as increased concerns about the risk of Fed subordination or changes in US reserve policy, leading to a sustained rise in central bank demand to 110t/m, a rebound in ETF holdings to pandemic-era levels due to a US recession, and speculative positioning reaching the top of the historical range. However, such a scenario is considered a low-probability event.

Goldman Sachs reiterates its long gold trading recommendation. Recent US bond market stress and gold's recent rally have reinforced Goldman Sachs' belief that gold is uniquely positioned as a hedge against recession risk. This week's bond market tightness and rising gold prices have further strengthened Goldman Sachs' confidence in gold as a unique recession risk hedge.