Gold Price Soaring: Three Drivers for a Bright Future

The barons of the financial world continue to bet on gold, even as the dollar maintains its strong position. Despite the challenges that have emerged in recent months, confidence in a sustained rise in the gold price remains high. In particular, the performance of other asset classes and the political course after Donald Trump's election have influenced gold's performance. Gold usually suffers under a strong US dollar. Since the beginning of the year, the US dollar index has risen by almost 6%, with a significant increase since October. Yet analysts are confident that gold could rise to up to $3,000 per ounce by the end of 2025, even in an environment with a persistently strong dollar. The main driver of this optimism is the Federal Reserve's monetary policy. Experts from Goldman Sachs forecast significantly lower interest rates for 2025 and are among the most optimistic voices on Wall Street. A decline in the key interest rate by over 100 basis points to a range of 3.25% to 3.5% is expected next year. Since gold does not earn interest, it is at a disadvantage in times of high interest rates. However, with falling interest rates, the precious metal could experience a boom. Goldman Sachs estimates that additional Fed rate cuts could raise the gold price by about 7% by the end of 2025. However, a prolonged high key interest rate poses risks to this forecast. If the Fed only lowers by 25 basis points, the gold price is expected to rise only to $2,890 per ounce. Another engine for the gold buying frenzy is increased purchases by central banks. Since the US sanctions against Russia in 2022, interest in gold as a dollar alternative has increased. Many countries were looking for diversification opportunities, which reinforced central bank gold purchases. Goldman Sachs assumes that foreign institutions will acquire 30 tons of gold per month by 2025 — a level structurally higher than before the sanctions against Russia.