How high can gold go amid trade tensions, inflation ambiguity?

Khaleej Times

27-03-2025

Gold prices are on fire with the yellow metal reasserting its role as a risk-mitigating asset. Now, after breaching $3,000 per troy ounce, the question is: how high can it go in a world fraught with trade tensions and inflation ambiguity?
In an increasingly volatile global landscape marked by trade tensions and inflationary pressures, investors worldwide are strategically repositioning their portfolios, leading to an uptick in demand for gold.
As market analysts speculate on future price trajectories, some foresee critical resistance levels at $3,100 and even $3,450 per ounce. While the World Gold Council refrains from issuing specific price targets, institutional forecasts from major financial entities offer insights into potential market movements.
Goldman Sachs recently revised its end-2025 gold price forecast to $3,300 per ounce, up from a previous estimate of $3,100. This adjustment reflects the bank's recognition of stronger-than-expected inflows into gold exchange-traded funds (ETFs) and persistent central bank demand.
Central banks have dramatically increased their gold holdings, with their share of total demand rising from a modest 1.8 per cent in 2010 to an impressive 21 per cent in 2024. This trend underscores a growing inclination among monetary authorities to stockpile gold as a buffer against economic instability. Goldman Sachs projects that large Asian central banks will continue their aggressive accumulation of gold over the next three to six years, aiming to meet their reserve targets.
Speculative predictions regarding gold prices vary widely, with some analysts suggesting that prices could reach as high as $5,000 per troy ounce by the end of 2025. However, seasoned bullion market experts urge caution, indicating that a more realistic price range is between $3,000 and $3,500 per ounce in the next few years. 'Gold tends to break its all-time highs multiple times, making precise predictions challenging,' noted a Dubai-based bullion trader.
Joseph Cavatoni, senior market strategist at the World Gold Council, emphasises that the recent surge above the $3,000 mark signals a significant shift in investor sentiment amidst escalating geopolitical and economic uncertainties. According to World Gold Council data, global gold ETFs experienced net inflows of $3 billion last week alone — equivalent to approximately 31 tonnes of gold. This marks the eighth consecutive week of inflows, predominantly driven by demand in North America. Year-to-date, total net inflows have surpassed $19 billion (207 tonnes), positioning 2025 for the strongest first quarter since 2022.
'Risk abounds, and investors are increasingly turning to risk-protecting assets,' Cavatoni said. Of the $19 billion in inflows this year, approximately $12 billion has been allocated to US gold investments, highlighting the American market's central role in global gold demand. He anticipates that European investments may accelerate in the coming months, especially if macroeconomic conditions deteriorate or if the dollar continues to weaken. 'The current administration's economic strategies are under scrutiny, influencing investor sentiment,' Cavatoni added.
Investment momentum in the gold sector is further supported by recent developments in China, where insurance companies have begun receiving approvals to invest in gold through the Shanghai Gold Exchange — indicative of a broader shift in investment strategies.
Analysts said while central bank demand remains robust — exemplified by continued purchases from countries like China, Poland, and Bolivia — the outlook for gold is intertwined with global economic conditions and investor sentiment. As geopolitical tensions persist and inflationary pressures evolve, gold is likely to maintain its allure as a safe-haven asset, making it a focal point for both institutional and retail investors in the years ahead.