Central Bank Gold Buying Frenzy Reshapes 2025 Price Forecasts

Investment banks and precious metals analysts are dramatically revising their gold price forecasts upward as unprecedented central bank purchases create a structural shift in global demand patterns. Goldman Sachs recently increased its year-end target to $3,100 per ounce, up from its previous projection of $2,890, citing “higher-than-expected demand for gold from central banks” as the primary driver behind the adjustment. This institutional buying surge, which began after Russian central bank assets were frozen in 2022, has intensified in 2025 amid growing concerns about U.S. policy uncertainty and potential currency devaluation risks.

The scale of central bank accumulation has surprised even seasoned market observers, with Goldman Sachs reporting that average monthly institutional demand on the London over-the-counter gold market increased fivefold following the freezing of Russian central bank assets. A December 2024 surge saw monthly buying reach 108 tonnes – compared to the pre-2022 average of just 17 tonnes – and preliminary data suggests this pace has accelerated further in 2025. This persistent institutional demand has established what several analysts describe as a “soft floor” for gold prices, limiting downside risk even as speculative positions fluctuate with changing risk sentiment.

Geopolitics Drives De-Dollarization Strategy

The unprecedented central bank gold accumulation represents a deliberate de-dollarization strategy by numerous countries seeking to reduce exposure to U.S. financial sanctions. According to J.P. Morgan Research analyst Gregory Shearer, “Central Banks aren’t done with gold yet, with added political uncertainty likely helping to stoke a revival into 2025,” as institutions seek to diversify reserves away from dollar-denominated assets.

China’s central bank has been particularly active in gold purchases, with the People’s Bank of China adding substantial tonnage to official reserves in recent months. As Shearer notes, “With the PBoC buying again and the potential for China’s currency to be further devalued with the risk of tariffs, we think gold-owning appetite among Chinese consumers could receive a boost too as investors turn to gold as a real asset store of value.” This institutional buying has accelerated following President Trump’s warnings in December that he would increase tariffs against BRICS countries if they sought to reduce the dollar’s dominance in global trade and finance.

Russian-Ukraine Developments Could Impact Buying Pace

Market analysts are closely monitoring geopolitical developments that could potentially slow the central bank buying frenzy. According to Morgan Stanley analysts cited by BullionVault, “We remain watchful of any slowing in central bank demand that may arise in the event of a potential Russia/Ukraine peace deal.” They note that “it was really the start of the [Ukraine] conflict in 2022, and the sanctioning of Russia’s assets, that catalysed the step up in central bank buying among emerging markets more generally.”

Diplomatic developments on this front have taken on increased significance for gold markets, with officials from the White House meeting Russian foreign minister Sergei Lavrov in Riyadh, Saudi Arabia to discuss Moscow’s invasion of Ukraine and a possible meeting between Trump and Vladimir Putin. The potential for a diplomatic breakthrough represents one of the few scenarios that could dampen central bank enthusiasm for gold accumulation, with Morgan Stanley warning that “a potential peace deal” could bring “some risk to prices.”

ETF Flows: The Next Catalyst?

While central banks have dominated gold’s demand story, analysts identify exchange-traded fund (ETF) flows as the next potential driver for higher prices. According to Shearer at J.P. Morgan, “Gold ETF holdings will likely hold the key to higher prices under this scenario,” noting that global ETF holdings sit at around 3,235 tonnes according to World Gold Council tracking through December 2024.

Significantly, this ETF tonnage remains 18% lower than the previous peak and approximately 6% lower than 2020 levels in real terms, suggesting substantial room for growth as investment sentiment improves. With “over $6 trillion still parked in money market funds,” Shearer believes this demand sector “looks primed for inflows under a more benign macro environment in 2025, which refocuses investor attention back on a Fed cutting cycle.” The combination of continued central bank purchases and renewed ETF buying could potentially push gold prices significantly higher as 2025 progresses.

Forecasts Increasingly Point Above $3,000

The surge in institutional gold demand has prompted widespread upward revisions to price forecasts across the financial industry. In a quarterly Reuters poll of 29 analysts and traders, the median forecast for gold in 2025 jumped to $3,065 per ounce, a substantial increase from the $2,756 predicted just three months earlier. This marks the first time the annual gold price forecast in the Reuters poll has exceeded $3,000, reflecting a fundamental reassessment of the metal’s value proposition in a changing monetary landscape.

Swiss bank UBS has similarly raised its targets, with strategist Joni Teves adjusting her full-year gold price forecast from $2,800 to $2,900 per Troy ounce while predicting the precious metal could peak as high as $3,200 in 2025. According to Teves, “Deep-rooted bullish sentiment [and] unprecedented gold market dislocations” mean the highest prices “are yet to come.” State Street Global Advisors has also joined the bullish chorus, with analysts predicting gold could trade as high as $3,100 per ounce in their bull case scenario (which they assign a 30% probability).

Price Resilience During Recent Correction

Gold’s recent pullback from all-time highs of $3,500 has demonstrated the stabilizing effect of central bank demand. Despite a three-day decline that brought prices to around $3,250 per ounce amid easing trade tensions, market participants note the decline has been orderly and found support well above previous consolidation levels. According to technical analysis from FXStreet, the next significant support zone lies at the $3,229-$3,228 region, which represents the 50% Fibonacci retracement level from the recent uptrend.

“While gold has corrected from its peak, the pullback appears measured rather than panicked,” explains market strategist Thomas Chen. “Central bank buying provides a strong fundamental underpinning that limits downside potential, particularly as we’re seeing evidence they’ve been accumulating on price dips.” This behavior contrasts with previous gold rallies that relied predominantly on speculative flows and suggests a more sustainable price structure has emerged in the current market environment.

Tariff Scenario Creates Upside Potential

Beyond central bank demand, analysts identify Trump’s tariff policies as a potential catalyst for further gold appreciation. According to J.P. Morgan’s Global Commodities Strategy head Natasha Kaneva, “We maintain our multi-year bullish outlook on gold. From a macro perspective, a universal tariff scenario would likely supercharge the broad price effects for precious metals. Boosted economic growth concerns and higher inflation risks could continue to fuel strong investor demand for gold.”

The impact of universal tariffs would likely be twofold for gold markets: first by potentially triggering safe-haven buying amid economic uncertainty, and second by exacerbating inflation pressures that traditionally benefit gold as a store of value. Goldman Sachs analysts note that concerns over the trajectory of U.S. government debt could amplify this effect, potentially driving central banks with large U.S. Treasury reserves to accelerate gold purchases while simultaneously boosting speculative positioning and ETF flows.