(News Bulletin 247) – The precious metal continues to push back its records, driven by continued vigorous demand and geopolitical uncertainties. UBS sees the commodity reaching $4,200 per ounce at the end of the year, and Goldman Sachs even expects $4,900 next year.

Gold continues to break its records. Again this week, the precious metal crossed, for the first time, the $4,000 per ounce mark, an unprecedented threshold.

Since the start of the year, gold has gained more than 50% (51.4% at the European close on Friday), an increase with which no equity index rivals. According to the New York Times, gold is set to sign its best year since 1979, when the second oil crisis caused by the fall of the regime of the Shah of Iran, then a major oil exporter, broke out. This resulted in a doubling of the price of a barrel.

The speed at which the “barbaric relic” – as the famous economist John Maynard Keynes nicknamed it – is climbing is taking market strategists by surprise. To give an example, as recently as mid-September, Deutsche Bank raised its projections for next year, counting on $4,000 per ounce on average. The establishment then noted that gold had already broken its previous projection ($3,700). The latest forecast from the German bank only held for three weeks, barely.

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Many increasing factors

We have already written numerous times about the factors that explain the progress of the precious metal. The political and geopolitical uncertainties caused by Donald Trump’s erratic economic policy, particularly with customs duties, have reinforced the role of gold as a safe haven. Especially since other traditional safe haven values, such as the dollar, American bonds (but also the yen with the upcoming arrival of a Japanese Prime Minister favorable to fiscal recovery and inclined to advocate for low rates) have seen their status weakened this year.

Uncertainties surrounding the control of public finances, particularly in the United States, may also have had an influence.

“The government’s budgetary wheels are squeaking again, deficits are widening and the dollar’s aura of reliability is wavering in the spotlight. Traders have seen this spectacle before: when confidence in the institutions that print money crumbles, gold becomes the institution that endures,” says Stephen Innes of Spi AM.

Significant purchases by central banks, particularly from China and emerging countries, have been a tailwind for almost two years now.

“Initially, this trend was driven by countries’ concerns about sanctions on their foreign assets following decisions by the United States and Europe to freeze Russian assets. However, this trend has evolved into a broader strategy of diversifying dollar reserves and dollar assets,” UBS pointed out in February.

More recently, the start of the cycle of rate cuts by the American Federal Reserve (Fed) last September further strengthened the metal’s appeal.

As a reminder, lower rates tend to support gold. Unlike stocks (with dividends) and bonds (with coupons), gold does not produce income. Its price is therefore helped by a fall in interest rates, because it then becomes more and more interesting to invest your money in gold rather than investing it.

Shutdown hurts

The weakness of the dollar, which has suffered against other world currencies since the start of the year, constitutes another technical support factor.

Like all raw materials, gold prices are denominated in dollars. A decline in the greenback makes, all things being equal, gold less expensive for investors whose base currency is not the dollar.

Finally, the “shutdown”, that is to say the paralysis of a large part of American federal services and, to a lesser extent, the climate of political uncertainty in France kept the rally going.

Political upheavals in France and Japan add to budgetary concerns and contribute to the rise in gold prices, wrote Nicky Shiels, head of metals research and strategy at MKS PAMP SA, in a note cited by Bloomberg.

As for the “shutdown”, it currently deprives the market of extremely important economic indicators (such as the US employment report) to take the pulse of the US economy, which can weigh on risk appetite.

‘”Gold still has room”

Has gold exhausted its potential after having progressed so much for almost two years now? Unanimously, strategists and analysts answer in the negative and therefore still see potential for gold.

For Deutsche Bank, gold “still has room to continue its course”. Listing the negative and positive factors, the establishment believes that the positive clearly has the advantage. In addition to the rate cuts by the American Federal Reserve (Fed), the bank emphasizes that the undermining of the independence of the American central bank by the Trump administration is likely to support gold due to “uncertainty about the reaction function” of the institution. Remember that Donald Trump continues to clamor for ever more pronounced rate cuts.

The American administration is currently trying to reshape the Fed’s monetary policy committee and the resident of the White House must decide in the coming months on a successor to Jerome Powell.

UBS, for its part, raised its forecasts last week, now counting on $4,200 per ounce of gold at the end of next December. The bank then sees the gold level stabilizing around these prices next year.

The bulk of this revision is due to more robust expectations of gold purchases on the part of index funds, ETFs, which reflect the appetite of individual investors.

“We believe that falling real interest rates in the United States, continued weakness in the US dollar and current political twists and turns will lead to higher prices, pushing inflows to ETFs beyond our initial forecasts, to around 830 tonnes for the whole year,” explains the Swiss bank. It previously expected 450 tonnes for this demand.

Concerning central bank demand, the Swiss bank estimates that it will be between 900 tonnes and 950 tonnes of gold, just a little below the 2024 record, which narrowly exceeded 1,000 tonnes.

$5,000 an ounce next year?

Goldman Sachs also raised its forecasts on Tuesday. The bank forecasts an ounce of gold at 4,900 dollars at the end of next December compared to 4,300 dollars previously.

In fact, the American bank has raised the starting point of its trajectory, given the recent rise in commodity prices. It still anticipates an increase of 23% over one year, but landing in 2025 at around 4,000 dollars (compared to 3,500 dollars previously).

Like UBS, the American bank highlights the importance of gold purchases by central banks and also believes that they will continue to diversify their reserves by acquiring significant quantities of the precious metal for another three years.

Goldman Sachs also highlights the strength of demand from Western ETFs. The American bank believes that this demand will be supported by future rate cuts from the Fed, estimated, cumulatively, at 1 percentage point by mid-2026.

Without too much surprise, Goldman Sachs writes that the “risks are oriented upwards” on its forecasts, that is to say that the bank is more likely to have to raise them than lower them.

“I would recommend overweighting gold, despite its high price, to protect against the US dollar and prepare for other future shocks,” David Chao, global markets strategist at Invesco Asset Management, told Bloomberg.

For ING too, this upward trend in gold “still has a bright future ahead of it”. The Dutch bank cites continued purchases by central banks and the trade war led by Donald Trump as catalysts. The Dutch establishment is also counting on an increase in ETF holdings and an intensification of expectations of further rate cuts by the American Federal Reserve.

This prompted him to revise upwards his forecasts for gold. ING now expects an average price of $4,000 per ounce in the fourth quarter, which would bring the annual average to $3,402 per ounce, before reaching an average price of $4,150 per ounce in 2026.