The three Wall Street banks have differing views on gold trends for 2025, reflecting a complex economic outlook.

Goldman Sachs published a report titled 'Go for Gold' on November 17, stating that gold prices are expected to reach $3,000 per ounce by December 2025.

This investment bank pointed out that gold plays a crucial role in hedging against potential economic tail risks, especially regarding the risks of policy uncertainty in the U.S. following President Trump's election victory.

The Goldman Sachs team, led by Co-Head of Global Commodity Research Daan Struyven, stated in their report, 'The range of U.S. policy changes in 2025 is unusually broad, enhancing the diversification role of commodities in the portfolio.'

They emphasized the potential of gold to protect investors from impacts such as the trade tariff escalations proposed by Trump and offered a basket of investment recommendations, including buying gold and shorting copper.

'Higher tariffs will reduce global growth (not favorable for copper prices) and increase uncertainty (favorable for gold prices),' the bank stated, citing price trends from when the U.S. raised tariffs in 2019 as an example.

Since late October, as the risk of disputes over the U.S. election results has decreased, gold prices have fallen by 7%. Meanwhile, the market has begun to price in higher interest rate prospects, which is typically unfavorable for gold prices.

Contrary to Goldman Sachs, Karen Ward, Chief Market Strategist for Europe, the Middle East, and Africa at J.P. Morgan Asset Management, holds a more skeptical view on the outlook for gold in her 2025 forecast.

Ward said, 'Investing in gold is an important signal that global investors are looking for something in short supply, as they worry about the value of fiat currencies.' However, she questioned the investment value of gold, adding, 'I just don’t think gold is the best option among things in short supply.'

In contrast, Ward suggested investors should look for alternatives that can provide annual yields and recommended assets, such as core infrastructure investments, rather than gold.

Switzerland-based UBS takes a middle ground between Goldman Sachs' enthusiasm and J.P. Morgan's caution.

Despite UBS maintaining an optimistic outlook for gold, it warned that the pace of gold price increases may slow. As of November this year, gold prices have risen 35% cumulatively. Nevertheless, it still expects this precious metal to outperform other commodities, approaching $2,900 per ounce by the end of next year.

'Since the onset of the Russia-Ukraine conflict in 2022, the relationship between gold and U.S. real interest rates has become very asymmetric,' stated UBS Chief Economist Arend Kapteyn and Chief Market Strategist Bhanu Baweja in their 2025 outlook on November 18. 'Gold prices rise with declining U.S. rates but do not fall much with rising U.S. rates.'

UBS also believes that investors still have significant allocation space, as gold currently averages only 1%-2% of investors' portfolios, far below historical peaks.

Despite differing opinions from the three investment banks, they all point out that central bank demand will be a key support factor.

Goldman Sachs noted that central banks' gold purchases increased fivefold due to concerns over financial sanctions and sovereign debt sustainability. UBS confirmed this and suggested that central banks view gold as a tool for portfolio diversification and a stable reserve asset.

Karen Ward of J.P. Morgan also agreed with the views on sovereign-related risks, stating, 'In a world of rising government debt, we should be concerned. We should be worried about mid-term inflation.' Ward acknowledged that broader economic concerns make gold attractive, but she still questions its ultimate investment value.

Article forwarded from: Jin10 Data