NEW YORK – Global investment bank Goldman Sachs has outlined the reasons why global gold prices could reach record highs by the end of 2025.

According to Goldman Sachs, there are two main drivers behind this outlook:

1. A wave of large-scale gold purchases by central banks around the world.
2. A surge in retail investor demand through Exchange-Traded Funds (ETFs).

These two market forces are expected to generate unprecedented long-term demand, according to Goldman Sachs Research in the article “Why gold prices are forecast to rise to new record highs,” published on goldmansachs.com on Thursday (15/5).

[Gold ETFs are exchange-traded mutual funds backed by gold, functioning like shares of a company. They are designed to track the price of gold, allowing investors to gain exposure to gold’s price movements without holding physical bullion.]

Throughout its long history, gold has consistently acted as a safe haven during global crises and geopolitical uncertainty.

The sharp rise in gold prices throughout 2025 once again underlines its role as a safe haven asset, especially amid growing market anxiety over tariff policies from US President Donald Trump’s administration and mounting fears of recession.

Gold has also been supported by declining equity prices and macroeconomic uncertainty.

Although gold experienced a temporary 5% correction due to equity margin call-related selling, Goldman Sachs noted that this was not a sign of fundamental weakness but rather a short-term liquidity squeeze.

One of the key catalysts for gold demand over the past two years has been the reaction to the freezing of over USD 280 billion worth of Russian assets by the G7 countries.

This incident sent a powerful signal that foreign exchange reserves held in dollars or euros could be unilaterally seized by the US and other G7 nations.

The ripple effects have been profound. Central banks worldwide are now reallocating their reserves into physical gold, which is safer and can be stored domestically.

Since 2022, central bank gold purchases via the London over-the-counter market have surged fivefold.

Developed countries such as the US, Germany, and Italy have long held about 70% of their reserves in gold—a legacy from the gold standard era.

By contrast, emerging markets like China have gold reserves accounting for less than 10% of their total.

This has triggered a quiet race among emerging-market central banks to catch up, thereby intensifying global gold demand.

In addition to central banks, institutional and retail investors are also playing a major role through gold ETFs. With over USD 294 billion in assets under management and holdings of around 3,000 tonnes of gold, ETFs have become a popular tool for investors seeking protection against inflation and market turbulence.

ETF holdings are typically closely correlated with interest rates. As bond yields weaken and recession fears grow, investors shift into gold, increasing demand pressure.

While this correlation had briefly diverged due to central bank dominance in the gold market, the link between interest rates and gold has not completely disappeared.

Thomas, an analyst at Goldman Sachs, explained that the combination of ETF flows and central bank buying has created a “competition” for the limited global gold supply.

Goldman Sachs Research projects that gold prices will rise from USD 3,220 to USD 3,700 per troy ounce by the end of 2025, and could even reach USD 3,880 in the event of a global recession.

Private investors are also expected to start reallocating portfolios away from US-based assets such as Treasuries and S&P 500 equities, which are increasingly seen as ineffective safe havens in the current market environment.

Interestingly, even a small shift in capital from US markets to gold could have a major impact, considering that total global gold ETF value currently represents only about 1% of the US government bond market and 0.5% of the S&P 500’s total market capitalisation.

“If previously it was only central banks driving demand, now ETF investors are heating up the market too,” said Thomas. “As the two groups compete for the same gold, prices are bound to rise even further.” (EF/ZH)