Goldman Sachs Reaffirms US$3,000 Target For Gold – Irrespective U.S. Dollar Strength

Gold prices could hit US$3,000 an ounce by the end of 2025, even if the value of the U.S. dollar continues to rise, Goldman Sachs has said.

Typically, increases in the value of the dollar have driven down gold prices by reducing demand for the metal as a safe haven asset, but analysts from the investment bank believe that investors could see increases in both gold prices and the value of the U.S. dollar next year, due to interest rate cuts and heightened uncertainty. 

Instead of the dollar’s strength determining the value of gold, they see the interest rates set by the Federal Reserve to carry more weight in determining gold’s price in 2025. Interest rate cuts typically increase demand for gold by reducing the attractiveness of government bonds and other interest-yielding assets.

Additionally, a stronger U.S. dollar may incentivize more central banks to purchase gold to restore confidence in their own currencies as they weaken against the dollar. China, for example, has large dollar reserves and a long-run strategic interest in diversification, and may even increase gold demand during periods of local currency weakness to boost confidence in the Yuan. Continued central bank buying of gold could provide a tremendous tailwind into 2025 that helps put the price beyond US$3,000.

And, of course, there is a lot of geopolitical tensions and uncertainty in the world, which we have written about many times. With burgeoning government debt, expensive wars and significant trade tariffs all occurring at once or on the horizon, we can expect gold’s value to be boosted as investors seek flight to safety. Before we turn the page on 2024, the Federal Reserve will meet this week to decide on interest rates, and analysts and commentators are unanimous in expecting a third consecutive cut.