reached an all-time high of $3,500 an ounce, breaking its previous highs and captivating the imagination of investors worldwide. The all-time high price is against the background of a combination of positive factors, from geopolitical tensions to relentless demand from central banks and economic fundamentals. The yellow metal is being viewed by investors as the safest haven during a crisis, sparking growth many believe could be here to stay.
The million-dollar question now is: Why is this happening now, and can gold rise further? In this article, we will explore the reasons behind the recent spike in gold prices and ascertain whether these conditions point towards further growth.
The Safe-Haven Effect
Geopolitical unrest, from what has occurred in Ukraine to unrest in the Middle East and saber-rattling in Asia, has become a main force behind the increase in gold prices. Over the past few years, this process of “risk elimination” has been in full force. For example, the 2022 war in Ukraine drew investors into gold and other safe-haven investments as global markets faced the largest conflict in Europe since the last century. Similarly, fighting in the Middle East put a risk premium on gold prices. When fears of an expanded regional war increased toward the end of 2023, after incidents such as Iran’s threats against Israel, gold quickly soared to record levels above $2,400 at the time as frightened investors took refuge in it.
Recently, the tensions between the US and China, ranging from trade wars to Taiwan, have added more glamour to gold. Trade disagreements, which have mounted due to new tariffs and export restrictions, have caused markets uncertainty, triggering fast buying. During mid-April 2025, gold crossed $3,500 for the very first time since President Trump’s unexpected testing of major mining tariffs fueled the world trade war and forced investors into safe haven. “Trump’s trade war shows no signs of abating.”. This gives a new momentum to the flight to safe havens and selling of stocks,” said Ole Hansen at Saxo Bank, highlighting that the political struggle has direct fueled demand for gold.
Central Banks Are Buying More Gold Than Ever
Yes, it is true! Another strong contributor to the rise in gold prices is central banks’ historical demand. Central banks replenished reserves with some 1,045 tons of gold in 2024, according to the most recent data from the World Gold Council, the third consecutive year where annual purchases have totaled over 1,000 tons. It is a record build-up, over twice the average annual buy amount between 2010 and 2021, and one which has evidently contributed to pushing the gold price higher. It is noteworthy that a wide range of countries are involved in this trend. The National Bank of Poland, for example, led the way, purchasing approximately 90 tons last year, and significant revenues also came from central banks in developing countries in Asia and the Middle East. Institutional holders such as China have been building up their gold stock month by month, and other traditional buyers such as Turkey (and others such as India and Singapore) have been steadily adding to their stock as part of a diversification exercise.
Source: IMF IFS, Respective Central Banks, World Gold Council
This buying of currencies by central banks is popularly known as being part of a global tendency toward “de-dollarization.” Countries seem to reduce their use of the US dollar as a foreign exchange reserve and instead turn to gold as a neutral reserve asset. Under these circumstances, there is a growing realization that dollar reserves can be a source of geopolitical vulnerability. It is a physical commodity that can be stored at home and is nobody’s problem. As noted by IMF official Gita Gopinath, several countries now view gold as a “sanctions- and confiscation-proof safe asset,” and this has assisted central banks in meeting about a quarter of total gold demand in recent years.
Source: IMF IFS, Respective Central Banks, World Gold Council
Economies like China are clearly looking to diversify their reserves, and despite huge purchases, they may well have plenty of time left. The Chinese central bank, which has reportedly added more than 200 tons of gold in the past one-and-a-half years, still has a relatively modest percentage of gold (about 4-5%) in total reserves. This is minuscule relative to industrialized countries (where gold can account for as much as 60% of reserves) or even the average among other developing countries. That is, central banks, especially in Asia, can simply continue buying gold for years until they have the desired level of reserves. Goldman Sachs, for example, raised its estimates for official sector demand, now anticipating key Asian central banks to “aggressively” purchase gold (some 70 tons a month) over the next 3-6 years.
Macro Outlook
Apart from geopolitics and central banks, gold prices are also increasing under the pressure of macroeconomic factors. The key among them are fears over and potential shifts in interest rates in the future. Despite inflation having hit a peak in some nations, investors remain afraid of steep price pressures, and gold is an old-fashioned hedge against falling purchasing power. Expects for inflation to remain above central bank targets have benefited gold, as investors have been willing to tie up value that can keep pace with rising prices. Moreover, the timing of when central banks begin to ease monetary policy has become a turning point. Most markets expect that by 2025, the US and other major central banks will make a transition from rate hikes to rate cuts as economic growth slows down and the fight against inflation enters a new phase. The very likelihood of a reduction in interest rates is bullish for gold because reduced interest rates reduce the “opportunity cost” of owning an unprofitable asset like gold and have a tendency to put downward pressure on the dollar.
Unexpectedly, gold has thrived in conditions once considered unpropitious, i.e., a rising interest rate and a strong dollar. As a matter of general principle, an increase in real interest rates (after adjustment for inflation) increases the relative appeal of interest-bearing instruments over gold. Yet recent gains in gold prices break this ancient game rule. In 2024, for example, gold still rose in price despite. Treasury yields and the dollar were rising, so other influences (such as demand for safe assets and central bank purchasing) were greater than the impact of higher interest rates.
Looking forward, we can say this: the macroeconomic backdrop is becoming increasingly favorable to gold. The majority of forecasters expect major central banks to start cutting rates by late 2025, especially if the economy is headed for recession. If inflation remains somewhat higher (let’s say around 3% in the US and higher elsewhere), while rates decrease, real yields will fall – a tried-and-tested recipe for higher gold prices. Even in circumstances that rule out an official recession, any sign that the Fed will halt or reverse its hikes will be bullish for gold. The J.P. Research Group Morgan pointed out that investors are looking to gold as a means of protection against just such circumstances: persistent inflation and potential changes in global monetary policy in the face of uncertainty. In fact, the current macroeconomic scenario – inflation fears coupled with expectations of future monetary easing – is yet another crucial reason why the gold rally has more room to continue its advance. Gold is an insurance policy against inflation and a possible valuable bet on better politics in the future.
Price Predictions
Following the spectacular surge in gold prices, Wall Street analysts and analysts elsewhere are toiling day and night to modify their forecasts, often upgrading increasingly lofty goals for themselves. Although most at this juncture would concur that the surge in the price of gold is far from over, some would hardly be shocked if the metal’s price reaches $3,700 or even $4,000 an ounce over the next two years.
- Goldman Sachs: Goldman’s commodity analysts are growing increasingly bullish on gold. In mid-April 2025, Goldman raised its year-end gold price target to $3,700 an ounce, one of the highest rates on the market. Why? Goldman refers to the “greater desire of investors and official institutions to pay for gold’s lack of credit risk or counterparty risks” in present situations. The bank is stating that factors such as imminent falls in global interest rates, structurally high demand by central banks, and gold’s hedging appeal will continue to propel prices higher. In fact, Goldman analysts view gold as such a sanctuary that in a bull scenario, they could even place it as high as $4,000 by mid-2026.
- UBS: Swiss banking giant UBS is also optimistic. The company recently raised its 2025 estimate to $3,600, from the previous $3,200, and sees the growth continuing in 2026. UBS analyst Joni Teves identifies “heightened tariff uncertainty, softer economic growth, rising inflation, and persistent geopolitical risks” as conditions under which “the case for raising the proportion of gold has never been stronger.” As UBS sees, the changing international climate favors the employment of gold as a safe-haven asset. They see robust demand not only from central banks, but hedge funds, asset managers, and retail purchasers as well, as expansion in supply (mining) remains bottlenecked. That combination bolsters their optimistic view.
- ANZ Bank: ANZ analysts, one of Asia’s top Pacific region banks, have joined the bullish crowd as well. ANZ increased its end-of-2025 estimate for the price of gold to $3,600 (along with a near-term 6-month target of $3,500) back in April of 2025. ANZ cited a few reasons in gold’s favor, including “growing prospects of a worse recession, another realignment of the geopolitical landscape, [and] apprehension of rising inflation coupled with a change in the interest rate environment,” all of which point towards gold maintaining a strong position. In reality, they believe the current macroeconomic threats will linger and the sentiment of investors towards gold will continue.
XAUUSD, Weekly
In the current realities, the bullish scenario is the most probable. Gold overcame the critical Fibonacci resistance level of 361.8 and crossed the upper Bollinger line before falling. The bullish sentiment is only increasing, though!
- We consider buying XAUUSD only on a bounce from 3300 with a target of 3750 in 2025.
- If the growth continues, the next target will be 4200, which may well become real in 2026!
XAUUSD, Monthly
Moreover, if we look at the monthly timeframe, we can only state that the 4200 level could be the next target in case of a bounce from 3300.
Of course, not everybody is indiscriminately bullish – contrarian views also exist, warning that a sudden spike in the price of gold could bring about a pullback. Under such a euphoric environment and with gold having shifted to technical overbought levels, there are cautionary signals from several analysts that the market is going to be tight in the near term. Growth has become a bit tenuous, which generates the risk of a correction,” said Saxo Bank’s Ole Hansen, although he concurred that until now all the losses have been minor, not everybody is wildly optimistic – there are contrary opinions, warning that a robust spike in the price of gold can initiate a pullback. With such a euphoric mood and gold reaching technical overbought levels, however, some analysts warn that the market might be nervous in the next few days. “Growth has gotten a bit wobbly, which leaves us at risk of a correction,” noted Saxo Bank’s Ole Hansen, although he admitted that so far all the falls have been minor.
Conclusion
So, does this mean that the price of gold will only go up from here? Not necessarily – there will certainly be ups and downs and volatility along the way. However, the foundations of gold’s fundamentals are solid and varied. In an infinite universe of uncertainty and constantly changing economic structures, gold seems to have moved from the categories of secondary to primary ones: it is no longer simply valued as a passive artifact or protective measure in case of emergency, but as a strategic column of preservation of assets. With the international paradigm and monetary winds changing, the ancient allure of gold seems set to persist, and that further means current all-time highs in hindsight may be nothing more than another stepping-stone along the long journey of gold’s growth.