Gold prices are trading at fresh all-time highs and within striking distance of $3,000 an ounce. While everyone has their eyes on this target, one bank said even after the breakthrough, the yellow metal’s rally is far from over.
The commodity team at Macquarie, led by Marcus Garvey, updated their 2025 gold price forecast on Thursday and now sees the precious metal pushing to a high of $3,500 an ounce by the third quarter. The Australian bank’s new target would match gold’s inflation-adjusted all-time high set in January 1980.
The updated price forecast comes as gold is already trading at the bank’s second-quarter target. Spot gold last traded at $2,982.60 an ounce, up 1.62% on the day, and the precious metal is up more than 13% since the start of the year.
The analysts said that gold remains an important safe-haven asset as the bank’s economists expect global economic growth to fall to 0.3% by the third quarter of this year.
“We view gold’s price strength to date, and our expectation for it to continue, as primarily being driven by investors’, and official institutions’, greater willingness to pay for its lack of credit or counterparty risk,” the analysts said in the note. “This is reflected in it already reaching nominal all-time price highs ($2,956/oz on February 24), even as the opportunity cost of holding gold (as a zero-yield asset) has been relatively high.”
Along with gold’s safe-haven allure, Macquarie sees gold being driven by the deteriorating outlook of the U.S. government’s growing debt. The U.S. government is once again facing another potential shutdown as Congress is unable to pass a new funding bill. Looking ahead, the analysts said that they don’t expect the U.S. government to be able to materially cut spending.
“While the outcome remains inherently uncertain, our base case assumption is that CBO projections for the budget deficit will deteriorate relative to current law; with tariff revenues, savings achieved by the Department of Government Efficiency (DOGE), and potential cuts to Medicaid insufficient to fully offset the extension of the Tax Cuts and Jobs Act (TCJA, potentially adding 1.5ppts to the deficit),” the analysts said. “Against this challenging fiscal backdrop, and that of many advanced economies, gold prices are likely to remain historically elevated.”
Garvey’s team also expect gold’s rally to be supercharged if the Trump Administration challenges the Federal Reserve’s independence by pressuring it to cut rates. The Federal Reserve has recently moved to a more neutral stance, saying that it is in no hurry to cut interest rates given that the U.S. labor market remains relatively healthy and inflation risks persist.
Although gold is on the verge of a major milestone, Macquarie noted that there is very little froth in the marketplace. They added that with investment demand in gold-backed exchange-traded funds down 20% from the 2020 all-time highs, the market still has ample room to move higher.
The commodity analysts see very little downside risk to gold this year.
“Ultimately, for this structurally supportive environment for gold to change, it would likely require a turn in the market-expected path of the U.S. deficit and/or positive reasons for higher-for-longer real yields,” they said. “For example, stronger trend productivity growth that increased trend GDP growth. Plausible scenarios, but not our current base case.”
Although gold is expected to continue to outperform in the precious metals space, Macquarie is also bullish on silver. The analysts increased their forecast for silver to $33.50 by the third quarter, up from the previous forecast of $31 an ounce.
However, Macquarie still predicts an elevated gold-silver ratio of nearly 92 points.
The Australian bank expects silver’s fundamental supply and demand imbalance to support prices through this year and into 2026.
“With the scale of deficits still too large to be overcome by supply growth—2024e 189Moz, 2025f 157Moz—the underlying physical market is expected to remain tight throughout our current forecast window,” the analysts said. “Considering our pre-investment balance of a 55Moz surplus for 2025, rising to a 75Moz balance in 2026, it should only require modest coin and bar demand, before any return of ETF inflows, to keep prices healthy. This illustrates how the return of stronger financial buying, including through derivative positioning, retains the scope to drive periods of pronounced silver performance.”
Source: Neils Christensen Kitco
