Gold broke above $3,000 and reached another price milestone

Author: Yang Dapan

On Friday, gold hit another all-time high, hitting the $3,000 mark expected by many Wall Street investment banks, and the precious metal has risen nearly 15% since the start of the year.

Nitesh Shah, commodity strategist at WisdomTree, said: "The risks for gold are slightly to the upside as confidence in gold is strong right now and is likely to persist if this chaotic policymaking continues. ”

US President Donald Trump's tariffs have played a significant role in boosting demand for gold. The global trade war, which has ruptured financial markets and sparked fears of a recession, is escalating as Trump on Thursday threatened to impose 200 percent tariffs on alcohol imports from Europe.

Ole Hansen, head of commodity strategy at Saxo Bank, said: "Momentum and safe-haven demand have also supported gold prices by driving ETF holdings. ”

SPDR Gold Trust, the world's largest gold-backed ETF, said it held 905.81t after hitting its highest level since August 2023 at the end of February.

While all eyes are on this target, one bank said that even if it breaks through this barrier, gold's rally is far from over.

Macquarie Bank's commodities team, led by Marcus Garvey, updated its 2025 gold price forecast on Thursday, and they now expect the precious metal to push up to a high of $3,500 an ounce in Q3, on par with the inflation-adjusted gold all-time high set in January 1980.

Macquarie's updated forecast comes as gold is trading at the bank's second-quarter target.

Gold remains an important safe-haven asset as economists at the bank expect global economic growth to slow to 0.3% in the third quarter of this year, analysts said.

Macquarie analysts said in the report: "We believe that the strength of the gold price so far, and our expectation of continued strength, is largely due to the greater willingness of investors and authorities to avoid risk. This is reflected in the fact that it has reached a nominal all-time high of $2,956 an ounce on February 24, even though the opportunity cost of holding gold (as a zero-yield asset) is relatively high. ”

In addition to gold's safe-haven appeal, Macquarie Bank believes that the deteriorating outlook for the US government's growing debt is driving gold prices higher. With Congress failing to pass a new appropriations bill, the U.S. government once again faces a potential shutdown. Looking ahead, analysts said they don't expect the U.S. government to cut spending significantly.

"While the results remain inherently inconclusive, our underlying assumption is that the Congressional Budget Office's projections of budget deficits will deteriorate relative to current law," the analysts said. Tariff revenues, savings realized by the Department of Government Efficiency (DOGE), and potential cuts to Medicaid are not enough to fully offset the extension of the Tax Cuts and Jobs Act (TCJA), which could increase the deficit by 1.5 percentage points. Against this challenging fiscal backdrop, as well as in many advanced economies, gold prices are likely to remain historically high. ”

Garvey's team also expects gold's rally to accelerate if the Trump administration challenges the Fed's independence by pressuring it to cut interest rates. The Fed has recently shifted to a more neutral stance, saying 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 about to reach a major milestone, Macquarie Bank noted that there is very little bubble in the market. They added that the market still has plenty of upside as investment demand for gold-backed ETF gold is down 20% from its all-time high in 2020.

Macquarie commodity analysts believe that the downside risk to gold this year is minimal.

"At the end of the day, changing this structurally supportive environment for gold may require a shift in the expected path of market expectations for the US deficit, or a positive case for higher long-term real yields," they said. For example, stronger trend productivity growth, which boosts trend GDP growth. These are reasonable assumptions, but they are not our basic assumptions at the moment. ”

While gold is expected to continue to outperform in the precious metals space, Macquarie is also bullish on silver, with analysts at the bank raising its forecast for silver to $33.50 an ounce in the third quarter from $31 previously.

However, Macquarie still predicts the gold-silver ratio to remain at a high level close to 92 points.

The Australian bank expects silver's fundamentals, namely the supply-demand imbalance, to continue to support its price this year and into 2026.

"The silver deficit is still too large to be covered by supply growth," analysts said. With an estimated 118.9 million ounces in 2024 and 157 million ounces in 2025, the underlying physical market is expected to remain tight within our current forecast window. Considering our pre-investment balances of 55 million ounces of surplus in 2025 and 75 million ounces of surplus in 2026, only modest coin and bar demand is needed to keep silver prices healthy until ETF inflows resume. This suggests that there is still room to push silver prices significantly higher, with the return of stronger financial buying, including through derivatives positioning. ”