Gold has a strong start of the year; what are the big investment banks' forecasts?

The price of gold has started the year on a high note, with the precious metal rising 12% in less than two months and hitting new all-time highs, amid a turbulent international environment in terms of macroeconomics and geopolitical sentiment, fueled primarily by the new administration in Washington. The rise follows a 27% appreciation last year, as the US central bank cut interest rates and heightened global tensions prompted investors to turn to the traditional safe-haven asset. Major investment banks are predicting that the price of gold will continue to rise this year, surpassing $3,000 per ounce, a move that will be driven by central bank purchases.

• Goldman: "We estimate that higher demand from central banks will add 9% to the price of gold by the end of the year"

Goldman Sachs recently raised its forecast for the price of gold for the end of this year to $ 3,100 per ounce, compared to the previous estimate of $ 2,890, writes Reuters.

"We estimate that higher demand from central banks will add 9% to the price of gold by the end of the year, which, together with the gradual increase in ETF holdings in the context of falling interest rates, should offset the negative impact of normalization of positions (investors' note), assuming that uncertainty decreases. On the other hand, if uncertainty - including tariff fears - remains high, a higher speculative positioning for a longer period of time could push gold prices to $3,300 an ounce by the end of the year," the investment bank's analysts say.

Yesterday, around 3:30 p.m., the precious metal was trading at $2,940 an ounce.

Goldman also revised up its estimate for central bank demand (of the United States) from 41 tons per month to 50 tons, Reuters also writes.

• UBS: "Gold has seen unprecedented dislocations and record prices in just over six weeks since the start of the year"

Swiss bank UBS estimates that gold could hit a high of $3,200, up from its previous estimate of $2,900, before stabilizing at high levels in the coming years, according to Investing.com.

Joni Teves, a strategist at UBS, believes that strong bullish sentiment, along with strong demand from governments and financial institutions (such as central banks), are key factors that could support gold's rise.

"It's only February and yet so much has happened. While sentiment is likely to be widespread in financial markets in 2025, the gold market has seen unprecedented dislocations and record prices in just over six weeks since the start of the year (...). Our latest assessment of market conditions leads us to revise our price forecasts upwards," Teves wrote in a note.

In his opinion, for investors concerned about long-term themes such as the devaluation of fiat currencies, the continued deterioration of the US fiscal deficit and geopolitical risks, gold should be suitable for inclusion in a diversified portfolio, writes Morning Star.

The UBS strategist also pointed out that investors who missed out on buying opportunities in 2024 can adopt a "carpe diem" approach, which means taking advantage of market corrections more promptly. The UBS forecast also suggests that liquidity problems may further amplify the rise in gold prices, making the market particularly sensitive to increased physical demand, according to Investing.com.

• Metals Focus: "We have seen one of the largest physical gold flows from around the world into the United States in the last seven to eight weeks"

Philip Smith, chief executive of brokerage group StoneX, says the continued uncertainty over President Donald Trump's trade tariff policy, which could impose a 10% or even 25% tax on bullion imports, is having a "disproportionate and distorting effect on gold prices," writes BullionVault.

"What we have seen over the last seven to eight weeks has been probably one of the largest physical gold flows from around the world into the United States. "We estimate over 2,000 tonnes," said Nikos Kavalis, chief analyst at Metals Focus.

"The metal is being transported there from all over the place where there are refineries." Michael Widmer, an analyst at Bank of America, believes that retail and institutional investors should join emerging market central banks in buying gold. In his opinion, a combined 10% increase in their demand could propel the price of gold to a peak of $3,500. "It's a lot, but not impossible," Widmer said, quoted by BullionVault.

Morgan Stanley analysts believe that after it exceeded 1,000 tonnes for the third consecutive year (according to World Gold Council estimates) - equivalent to 29% of the amount mined, the pace of central bank gold purchases is critical to the price outlook. "We are wary of any slowdown in demand from on the part of central banks, which may arise in the event of a possible peace agreement between Russia and Ukraine," Morgan Stanley said.

According to the bank's analysts, the central banks' purchases of the precious metal were catalyzed by the war in Ukraine that began in 2022 and the imposition of sanctions on Russia by Western countries. "We believe that a possible peace agreement brings some price risk," Morgan Stanley said, quoted by BullionVault.