Is it investment or speculation? Is gold heading to $3,000 next?

According to the Zhitong Finance APP, global gold demand has surged to a historic record, driving spot and futures gold prices to new highs, primarily fueled by central banks accelerating their purchases and investors seeking safe havens amid threats of escalating tariffs from Trump. On Wednesday, massive capital inflows driven by safe-haven attributes, along with speculative forces such as high-frequency hedge funds and retail investors, flocked to the gold trading market to capture short-term gains, resulting in gold prices reaching a historic high for five consecutive days, with spot trading prices breaking through $2,877 per ounce and futures prices climbing above $2,900 to a historic high.

According to the latest report from the World Gold Council, in 2024, "central banks around the world continue to purchase gold at an astonishing pace," with a significant acceleration in purchases in the fourth quarter. Last year, global gold demand reached a record 4,974 tons.

Joe Cavatoni, a market strategist from the World Gold Council, stated that central banks' purchases of gold are primarily driven by "growing concerns over persistent inflation, geopolitical tensions, and the increasing pressure of debt repayment due to the ever-expanding budget deficit of the U.S. government, as well as the need for portfolio diversification."

The interest rate cut cycle initiated by the Federal Reserve last year has prompted global funds to flow into physically-backed gold exchange-traded funds (ETFs), including substantial inflows from Western investors. Since the Federal Reserve began its rate cut, the relatively low interest rate environment has been favorable for gold, as it does not have to compete fiercely with income-generating assets.

The World Gold Council's report indicates that global gold ETF demand remains stable, with 2024 being the first year since 2020 where holdings have remained largely unchanged, contrasting sharply with significant outflows in the previous three years.

So far this year, gold prices have risen by about 8%, while the increase for the entire year of 2024 is over 27%, even surpassing the strong 24% increase of the S&P 500 index.

Most investment institutions believe that the significant rise in risk aversion is the most direct reason for the recent increase in international gold prices, and market expectations for a trend towards looser monetary policy from the Federal Reserve remain unchanged, with gold still primarily being bought on dips for holding.

Carsten Fritsch, an analyst at Commerzbank, pointed out that Trump's erratic tariff decisions have exacerbated market uncertainty, enhancing gold's appeal as a "safe haven" investment.

Gold prices poised to break through the $3,000 mark

The World Gold Council stated in its "Gold Demand Trends" report on Wednesday: "In 2025, geopolitical and economic uncertainties remain high, and central banks around the world are likely to once again view gold as a stable strategic asset."

At the end of January, a team of analysts from Wall Street giant Goldman Sachs reiterated their bullish outlook on gold prices, believing that the threat of escalating U.S. tariffs will drive continued demand for gold purchases "We reiterate that holding gold for the long term remains our most confident trading recommendation in the commodities space, driven by both structural (central bank purchases) and cyclical (gold ETF purchases) factors," said the Goldman Sachs analyst team, reaffirming their gold price forecast of $3,000 per ounce before the second quarter of 2026.

Another Wall Street giant, Citigroup, believes that further escalation of tariffs will lead investors to remain bullish on gold for the next 6-12 months, with gold prices expected to rise to $3,000 per ounce.

Despite the U.S. government's announcement over the weekend that tariff measures against Mexico and Canada have been postponed, a 10% tariff on certain imported goods from China took effect on Tuesday.

World Gold Council analyst Cavatooni stated that gold demand in 2025 may depend on U.S. policy developments, including expectations for Federal Reserve interest rate cuts and the impact of tariffs.

"The reasons for central banks to continue purchasing gold remain very compelling," Cavatooni said in a media interview. "As for the inflow of funds into gold ETFs, if we see interest rate cuts restart, we may see an increase in investment demand for ETFs from Western investors," he added.

Jim Wyckoff, senior market analyst at Kitco Metals, stated that given the uncertainty brought to the market by the destructive policies of the current U.S. government under Trump, coupled with major central banks potentially increasing gold purchases to diversify away from dollar assets, gold prices could reach $3,000 this year.

Rania Gule of XS.com noted that the overall upward trend in gold remains intact, and any pullback should be viewed as a buying opportunity, as the supporting factors have not fundamentally changed. She also added that due to the ongoing uncertainty of Trump's policies, gold may continue to be a focus for investors, serving both as a hedge and an investment opportunity