Gold has been one of the standout performers in global markets this year — and according to analysts at Goldman Sachs and JPMorgan, the rally is far from over.
As of May 26, 2025, gold is up 27% year-to-date, trading at $3,351 per ounce, having outpaced both the stock market and Bitcoin. Goldman Sachs now forecasts that gold could climb to $3,700 per ounce by year-end, and potentially reach $3,880 if a recession hits. JPMorgan is even more bullish long-term, projecting prices to reach $4,000 by Q2 2026.
What’s Fueling the Gold Boom?
1. Safe Haven Demand Amid Global Uncertainty
Investors traditionally flock to gold during times of economic stress or market volatility, and 2025 has delivered plenty of both. The year began with rising fears of a global slowdown, mounting geopolitical risks, and inflationary pressures tied to tariff threats between major economies.
Although U.S. stocks staged a recovery from mid-April onwards — temporarily cooling gold’s rally — continued uncertainty surrounding federal budget negotiations, U.S.-EU trade tensions, and President Trump’s proposed 50% tariffs on the European Union have reignited interest in gold.
Even a temporary 90-day trade truce between China and the U.S. failed to provide lasting comfort to investors. Gold prices dipped to around $3,200 after hitting a record $3,433 on May 6, but have since rebounded on renewed fears of lasting economic fallout.
“Investors are starting to recognize that even the first wave of tariffs will eventually impact prices and growth,” notes Goldman Sachs.
2. Central Bank Gold Buying Hits Multi-Year Highs
One of the strongest undercurrents supporting gold prices is aggressive accumulation by central banks. Goldman Sachs highlights that since the freezing of Russian foreign assets in Europe in 2022, central banks have ramped up gold purchases — particularly on the London over-the-counter market, where demand has surged fivefold.
“They can keep the metal in their own vaults, out of reach of foreign governments,” said Goldman Sachs in its report Why Gold Prices Are Forecast to Rise to New Record Highs.
This structural trend is reducing the supply of tradeable gold and effectively raising the floor for prices.
The U.S., Germany, France, and Italy hold over 70% of their reserves in gold.
Emerging market central banks are now playing catch-up, seeking to diversify and de-dollarize their reserves.
“Even during corrections, the new lows are higher than where prices were just weeks earlier,” said Lina Thomas, commodities strategist at Goldman Sachs.
3. Falling Interest Rates and Surging ETF Inflows
Another critical tailwind is the expectation that interest rates will fall later this year. Lower rates reduce the opportunity cost of holding non-yielding assets like gold, making the metal more attractive.
This shift is already driving ETF inflows, with $294 billion now held in gold-backed ETFs, largely by pensions and long-term investors.
“ETF holdings are climbing faster than interest rate models would suggest — likely because investors are bracing for a potential recession,” said Thomas.
Historically, gold prices and interest rates move in opposite directions. While central bank gold buying has recently decoupled this relationship, ETF flows remain strongly tied to monetary policy and recession fears.
The Outlook: $3,700 Baseline, $3,880 If Recession Hits
Goldman Sachs maintains a baseline year-end target of $3,700, but sees potential for a move to $3,880 if recession indicators worsen. JPMorgan is even more optimistic, calling for $4,000 gold in Q2 2026.
Bottom Line:
Gold’s 2025 surge is driven by more than just market fear — it’s being underpinned by structural shifts in central bank behavior, changing investor allocations, and the realignment of global trade dynamics. If these trends persist, gold may not just maintain its historic highs — it could break through them.
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