Gold prices continue to break records. How far can they climb?

In late March, Goldman Sachs predicted that the price of gold would reach $3,300 an ounce at the end of the year.

It took less than a month to reach this level. Since then, gold has continued to rise to levels it could never have climbed before, and forecasters are having a hard time keeping up with the pace.

The price of the precious metal is now hitting all-time highs almost daily. Early last week, Goldman raised its year-end forecast to $4,900 an ounce from $4,300 previously. This surge happened at the right time: Gold surpassed $4,300 on Thursday for the first time, pushing its year-to-date gains to nearly 65%.

The biggest rise that gold has witnessed in half a century raises a clear question: How much can its price rise?

“Relentless” momentum.

In addition to Goldman’s new forecast, HSBC expects gold to reach $5,000 an ounce in 2026. Bank of America points to a record $34 billion flowing into gold in just the past 10 weeks, and is more optimistic, expecting gold to peak at $6,000 an ounce by spring.

“Momentum in gold has been relentless,” LPL said in a research note, citing a 3-to-1 ratio of bullish to bearish days for the metal since the end of August. “The recent rally has been supported by growing uncertainty over the US government shutdown and fear of losing flows to gold ETFs.”

One factor that plays a role in the rise in gold prices is the so-called bear trade. Global investors concerned about high levels of government debt have increasingly chosen gold and other hard assets in favor of government bonds and investments in US dollars.

Some investors have turned to gold in a global environment characterized by trade tensions, economic uncertainty and some concerns that stocks may be overvalued, UBS says. In addition to its role as a classic hedging tool against risk, UBS said that “gold’s low correlation with stocks and bonds, especially during periods of market stress, also makes it a valuable diversification tool.”

Finally, UBS said expectations that the Fed will continue to cut interest rates, even as inflation remains above its 2% target, should “further undermine the attractiveness of the US dollar and thus boost bullion investment flows.”

Can investors benefit from the funds?

In light of the dollar’s weakness, more global central banks have turned to gold to store their reserves this year. Central bank purchases increased after Russia’s invasion of Ukraine in 2022; Goldman says ETF purchases and central bank demand are “fixed within our pricing framework.”

Retail interest in physical gold has also increased demand. Owning gold bullion and gold jewelry has a long cultural history, especially in India and other parts of Asia. Many buyers in that area rushed to secure purchases as prices rose.

UBS expects total global gold demand this year to reach 4,850 metric tons, the highest level since 2011. Purchases from Perth, Australia, and the Mint, a major source for Asian buyers, increased 21% in September compared to August, the bank reported.

Of course, any strong rise in assets carries with it at least some concern. Although the World Gold Council’s position is that “the strategic foundation for gold remains strong,” it said that there are short-term scenarios that may prompt some gold investors to take advantage of the profits they have achieved this year.

For example, the resolution of the US government shutdown and other geopolitical tensions may cause gold investors to look elsewhere. It is also possible that the rapid increase in prices this year will weaken retail demand, and portfolio allocations to gold may be approaching the point where they require rebalancing to other assets.