Central Banks and ETFs Fuel Soaring Gold Prices, Goldman Sachs Forecasts $4,000 by 2026

According to a new report from Goldman Sachs, the ongoing gold rally is being fueled by demand from a few key players, namely central banks and long-term investors. Gold prices have already risen more than 27% so far in 2025, and the precious metal is currently trading around $3,380 per ounce, just 3% below its record high set in late July.

The investment bank's analysts believe the rally has room to run, forecasting gold prices in London to hit $3,700 by the end of 2025 and $4,000 by mid-2026. This surge in demand is being driven by central banks, particularly in emerging markets, who have been buying gold as a hedge against potential sanctions and the freezing of their foreign exchange reserves.

Additionally, long-term investors, such as those in exchange-traded funds (ETFs), have been pouring money into gold, with net inflows of $23 billion so far this year. This influx of "conviction buyers," as Goldman calls them, has been a key factor in pushing gold prices higher. The analysts estimate that for every 100 tonnes of net purchases by these groups, the price of gold typically rises 1.7%.

In contrast, "opportunistic buyers," such as households in developing nations, have a more limited impact on gold's price direction, as their demand tends to fluctuate based on price movements. However, their participation helps dampen the metal's price volatility.

Looking ahead, it appears unlikely that the conviction buyers will change course anytime soon. The need for safe-haven assets remains elevated due to ongoing geopolitical tensions and the prospect of declining interest rates, which make gold more attractive compared to bonds. As a result, the gold rally is expected to continue, with prices potentially reaching new highs in the coming years.