‘Go for gold’ says Goldman Sachs, but other Wall Street banks aren’t so sure
Three Wall Street banks have taken differing views on gold’s trajectory in 2025, reflecting the complex economic outlook. Goldman Sachs expects the price of the yellow metal to reach $3,000 per ounce by December 2025, saying “Go For Gold” in a note from Nov. 17. @GC.1 5Y line The investment bank cited gold’s critical role as a hedge against potential economic tail risks, particularly those surrounding U.S. policy uncertainties following President-elect Donald Trump’s election win. “The unusually wide range of potential US policy shifts in 2025 strengthens the diversifying role of commodities in portfolios,” said the Goldman team led by Daan Struyven, the bank’s co-head of global commodities research, in the note. They highlighted gold’s potential to protect investors against scenarios like escalating trade tariffs proposed by Trump and suggested a basket of investment ideas, including buying gold and shorting copper. “Higher tariffs would reduce global growth (negative for copper prices) and increase uncertainty (positive for gold prices),” the bank said, citing price action in 2019 when the U.S. raised tariffs as an example. The gold price has declined by 7% since late October as the risk of a disputed U.S. election result diminished. Meanwhile, the market started to price in a higher interest rate environment, which is typically negative for gold prices. In contrast to Goldman Sachs, Karen Ward, chief market strategist for Europe, Middle East, and Africa at JPMorgan Asset Management, took a more skeptical view on the metal in her 2025 outlook. “Gold is a significant signal that global investors are looking for a store of something in short supply because they are worried about the value of fiat currencies,” Ward said. However, she challenged gold’s investment merit, adding: “I just don’t think gold is the best place to look for that thing in short supply.” Instead, Ward suggested that investors should seek alternatives that provide annual yields and recommended assets, such as core infrastructure investments over gold. Switzerland-based UBS took the middle ground between Goldman Sachs’ enthusiasm and JPMorgan’s caution. While maintaining a positive outlook on gold, UBS warned that its gains — gold had risen 35% this year until November — could slow down. Nevertheless, it still expects the precious metal to outperform other commodities, nearing $2,900 per ounce by the end of next year. “Since the beginning of the Russia-Ukraine war in 2022, Gold’s relationship with US real rates has become very asymmetric,” said UBS’ chief economist Arend Kapteyn and chief market strategist Bhanu Baweja in their 2025 outlook dated Nov. 18. “Gold rises as US rates fall, but it doesn’t fall much as US rates rise.” UBS also believes there is still substantial room for investor allocation as gold holdings currently represent only 1%-2% of investor portfolios on average, well below historical peaks. Despite their differing views, all three major financial institutions noted that central bank demand will emerge as a crucial supporting factor. Goldman Sachs pointed to a fivefold increase in central bank gold purchases, driven by concerns about financial sanctions and sovereign debt sustainability. UBS corroborated this and suggested that central banks view gold as a portfolio diversifier and a stable reserve asset. JPMorgan’s Karen Ward also echoed the narrative of sovereign-linked risks, saying: “We should be worried in this world of ever-rising government debt. We should be worried about medium-term inflation.” Ward acknowledged the broader economic concerns that make gold attractive, even while questioning its ultimate investment value. — CNBC’s Michael Bloom contributed reporting.
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