Gold has emerged as the star asset of the year, with its price rising nearly 23% year-to-date, far surpassing other financial products.
This upward trend is not the end, as Wall Street recently raised its target price for gold this year, pointing out that weak US economic data and escalating trade wars will continue to exacerbate economic uncertainty and drive investors into safe-haven assets.
In a report released last Friday, Goldman Sachs raised its 2025 gold target price from $3,300 per ounce to $3,700, a significant increase of 12%, marking the most aggressive upward revision by the institution this year. In February, Goldman Sachs expected this year's gold price target to be $3,000, and by the end of March, it was revised upward for the second time to $3,300.
Goldman Sachs noted that central bank demand for gold remains strong, and funds continue to flow into gold ETFs. Although some investors sold speculative positions in gold during the market's sharp decline earlier this month, the total open interest of gold ETFs is still rising due to concerns about an economic recession, and physical demand for gold in Asia also supports the price.
In addition to Goldman Sachs, UBS also continued to raise its gold price forecast, with a target price of $3,500 per ounce. It pointed out that declining demand for US Treasuries and the US dollar will drive the gold rally to continue into next year and stabilize at high levels for a longer period.
Joni Teves, an analyst at UBS, noted that in an environment of escalating tariff uncertainty, slowing economic growth, rising inflation, and lingering geopolitical risks, the rationale for increasing gold allocation is more compelling than ever.
Meanwhile, Deutsche Bank aims for gold to reach $3,700 per ounce by 2026. Previously, the bank's analysts had expected $2,900 per ounce.
Weakness in the US economy
Analysts are particularly focused on US macro data and emphasize that signs of a slowdown in the US economy were evident before the implementation of tariffs. According to Challenger, Gray & Christmas, over 497,000 people were laid off in the US in Q1, the highest for the quarter since 2009, a 93% increase from Q1 2024.
Additionally, US manufacturing and service activities have shown weakness. The US ISM Manufacturing Index fell from 50.9 in December to 49 in March, while the Services Index dropped from 54 in December to 50.8. An index below 50 typically indicates an economic contraction.
The Atlanta Fed's forecasting tool predicts that US Q1 GDP growth will be -2.4%. This figure may change, but GDP growth is likely to be significantly lower than the 3% seen last summer.
Many economists have warned of the possibility of stagflation and are concerned that the US will fall into an economic recession. The safe-haven attributes of gold are being increasingly amplified in the current environment, especially after the trade war has diminished the appeal of US Treasuries and the US dollar.
