Expectations for gold in 2025 were optimistic right from the start. Goldman Sachs, for instance, projected the price of gold to reach $3,000 per troy ounce, while analysts at State Street estimated it could rise as high as $3,100 per troy ounce. Even UBS was bullish, forecasting $2,900. But reality had other plans — and they were even brighter. Just this week, gold pushed past $4,100, and it’s looking like the rally might not be over yet. But more on that later.

But first, let’s take a quick recap of what’s been driving gold’s surge so far.

First on the list are central banks, which have added over 1,000 tons of gold each of the last three years. Although their gold purchases have slowed compared to 2023 and 2024, according to data compiled by the World Gold Council, demand remains strong. In fact, according to a survey conducted in June, 95% of institutions expect global central bank gold reserves to continue growing over the next year.

Geopolitics is the primary factor driving gold's appeal to central banks. Initially, the freezing of Russian assets — and talks about seizing them — sparked interest in gold. Then, Trump's trade wars pushed central banks to seek alternatives to dollar assets. With tensions between China and the U.S. escalating, this shift could accelerate unless the two countries reach an agreement rather than continuing to escalate the conflict.

Then there’s the Federal Reserve’s expected interest rate cuts. In short, lower rates usually make gold more attractive since it doesn’t pay interest like other assets. Additionally, the U.S. dollar has weakened, making gold more affordable for buyers worldwide. And, of course, uncertainty from the war in Ukraine, unrest in the Middle East, and the unpredictability of U.S. policy have solidified gold’s status as the go-to safe haven.

Finally, there is growing concern about the independence of the Federal Reserve and the imbalance between “paper gold” — such as ETFs and futures — and actual physical metal. As a result, many futures contracts are traded without the backing of actual gold. When prices rise sharply, those betting against gold are forced to cover their positions by buying physical gold at higher prices, which causes prices to rise even further.

What to expect next?

Despite gold looking overbought, the Bank of America recently revised its outlook upward, forecasting a rise to $5,000 per ounce by 2026, driven by an expected 14% increase in investment demand. The bank projects an average price of $4,438 per ounce that year, citing key factors such as the U.S. budget deficit, elevated debt levels, and inflation at around 3%. Société Générale, for instance, has expressed a similar outlook.