The priceof gold breached the $4,000-per-ounce threshold for the first time this week,marking another stunning milestone in a three-year rally that hasdemolished analytical models and converted longtime skeptics. Theprecious metal closed at $4,042.03 after hitting an intraday peak of$4,059.31, extending gains that have made it one of 2025's best-performingassets with a 52% year-to-date surge.The rallyaccelerated as the U.S. government shutdown entered its seventh day,delaying critical economic data releases and amplifying uncertainty acrossfinancial markets. Spot gold has now climbed more than 50% sinceJanuary while the dollar index dropped 10%, creating conditions thatindependent metals trader Tai Wong says could push prices toward $5,000.Why Gold Price Is GoingUp? Western Money FloodsBack Into GoldWesterninvestors poured $64 billion into gold ETFs through September, with themonth alone recording a record $17.3 billion, nearly double the previousmonthly high set during the 2020 pandemic panic.U.S.-basedfunds captured $35 billion of these flows, surpassing the entirepandemic year of 2020 when gold ETFs attracted $29 billion. September'sinflows represented the largest monthly gain in ETF history, capping thestrongest quarter on record at $26 billion. Holdings across globalgold ETFs reached 3,692 tonnes by August's end, the highest monthly closesince July 2022 and just 6% below the all-time record of3,929 tonnes.GoldmanSachs raised its December 2026 price target to $4,900 per ounce from$4,300, citing sustained ETF demand and likely central bankpurchases. The bank expects Western ETF holdings to climb as theFederal Reserve cuts rates by 100 basis points throughmid-2026, historically a powerful tailwind for bullion.Central Banks Stack Goldat Unprecedented PaceCentralbanks emerged as the dominant force behind gold's ascent, accumulating over1,000 tonnes annually since 2022, more than double the 2016-2021average of 457 tonnes. The buying spree reflects strategicdiversification away from dollar assets following Russia's 2022 invasion ofUkraine and subsequent Western sanctions.Key driversbehind central bank accumulation include:Reserve diversification away from U.S. Treasuries and dollar-denominated assetsProtection against potential asset freezes and geopolitical sanctionsHedge against mounting sovereign debt concerns and fiscal instabilityInflation protection as consumer prices remain above central bank targetsAugustsaw net additions of 15 tonnes to global reserves, with Kazakhstan'scentral bank leading purchases. Poland remained 2025's largest buyeryear-to-date, even reaffirming its commitment by raising its gold targetallocation. Gold's market value in central bank reserves has now almostcertainly surpassed holdings of non-U.S. Treasuries, while overtakingthe euro as the second-largest reserve asset earlier this year.World GoldCouncil data shows 44% of central banks actively manage their gold reservesin 2025, up from 37% the prior year. Survey respondents cite reservediversification, inflation protection, and geopolitical security asprimary motivations.China Steps Back asWest Steps InChinesegold demand drove much of 2024's 27% gain and the rally's first four months,visible in the "Shanghai premium", the spread betweenLondon benchmark prices and Chinese exchanges. But Chinese prices slipped belowthe benchmark in recent months even as gold hit new highs, signalingWestern investors took over as the primary force.Theshift occurred as trade tensions escalated under PresidentTrump's tariff policies, roiling global markets and unleashing safe-havenbuying in China through April. India's Reserve Bank also curtailed purchases,buying just 3.8 tonnes through August compared to 45.4 tonnes during thesame 2024 period.Multiple TailwindsConverge on GoldThedollar's 10% year-to-date decline made gold cheaper for internationalbuyers while reducing opportunity costs for holding non-yielding assets.Inflation remains elevated at 2.9%, above the Federal Reserve's 2% target,sustaining gold's appeal as a purchasing power hedge.Geopoliticaltensions across the Middle East and Ukraine continue fueling safe-havendemand, with energy market disruptions creating inflation risks thatfurther support bullion. The U.S. government shutdown compoundeduncertainty by delaying employment reports and other data crucial for Feddecisions.Ray Dalioadvised investors at the Greenwich Economic Forum to allocate"approximately 15% of your portfolio to gold," calling it"the one asset that performs well when the usual components of yourportfolio decline". Bank of America cautioned clients aboutpotential "uptrend exhaustion" and consolidation near $4,000,though the warning came before gold powered through the level.Breaking Every Recordin the BookGoldeclipsed its inflation-adjusted peak set 45 years ago whenprices topped $850 in January 1980. That high came as the U.S. battledcurrency collapse, spiking inflation, and recession followingPresident Carter's freeze on Iranian assets during the hostagecrisis. Analysts see faint echoes of those conditions today inTrump's trade policies, Fed independence concerns, and persistent inflation.The rally'smagnitude has benefited the U.S. government itself, with officialholdings surpassing $1 trillion in market value last month, over 90 times whatappears on federal balance sheets. This windfall dwarfsthe stated book value established when the Treasury valued gold at $42.22per ounce.Gold Price Predictions: Wall Street'sUpdated ForecastsMajorinvestment banks dramatically revised their gold outlooks asprices shattered previous targets. The table below shows how rapidlyanalyst expectations have shifted upward:GoldmanSachs leads with the most aggressive forecast, projecting $4,900 byDecember 2026, a 23% increase from current levels. The bank expectsemerging market central banks to average 80 tonnes of purchases in2025 and 70 tonnes in 2026, contributing roughly 19 percentage points tothe expected price gain.Deutsche Bankraised its 2026 average forecast to $4,000 per ounce from $3,700,citing official demand running at double the 10-year average and recycledgold supply coming in 4% lower than expected. HSBC also lifted its 2027 forecastto $3,600 from $2,925 and introduced a 2028 forecast of $3,330.Technical LevelsPoint Higher Despite Overbought SignalsAccordingto my technical analysis, gold's 14-day Relative Strength Index reached78.4 in mid-April, entering overbought territory for the first time since2020's pandemic surge. Fibonacci retracement analysis suggestsresistance near $3,250, though gold blasted through that level weeksago. Support now sits at $3,930, $3,900, and $3,860, with resistance at$3,980, $4,020, and $4,070.Moreover,the volume patterns show institutional rather than speculativeparticipation, suggesting sustained momentum despite extreme readings.COMEX futures open interest declined 12% during recent price spikes,potentially signaling distribution, though ETF inflows contradict thisbearish interpretation.What's Driving Gold PricesHigher?Economic factors:Federal Reserve rate cuts totaling 100 basis points expected through mid-2026U.S. dollar weakness with 10% year-to-date decline against major currenciesPersistent inflation at 2.9%, above Fed's 2% target rateMounting U.S. fiscal concerns with debt approaching $36 trillionGeopolitical catalysts:Ongoing conflicts in Ukraine and Middle East fueling safe-haven demandU.S. government shutdown delaying economic data and policy decisionsTrump administration tariff policies creating trade war uncertaintyAsset seizure concerns following Western sanctions on RussiaStructural demand shifts:Central banks buying 1,000+ tonnes annually versus 457-tonne historical averageWestern ETF inflows totaling $64 billion year-to-dateDedollarization trend among emerging market central banksPortfolio diversification away from traditional 60/40 stock-bond allocationRisks RemainDespite Bullish SentimentGoldman Sachsacknowledges risks skew to the upside "because private sectordiversification into the relatively small gold market may boost ETFholdings above our rates-implied estimate". The bank expectsemerging market central banks to continue structural reservediversification, averaging 80 tonnes in 2025 and 70 tonnes in 2026.Potentialheadwinds include lasting peace in Ukraine or the Middle East,though analysts say core drivers, massive debt, reservediversification, and dollar weakness, won't shift soon. Better U.S.growth or Fed rate hikes due to inflation surprises couldpressure gold, though market consensus leans toward continued easing.The put/callratio for gold options climbed to 1.4 as net long futures contracts reached287,000 in March, suggesting sophisticated investors hedge while maintainingcore positions. Retail sentiment surveys show 42% consider gold"overvalued" above $3,000, compared to 18% at $2,500, potentialfuel for further upside if skeptics capitulate.Gold ETF Holdings SurgeBut Room RemainsHoldings inbullion-backed exchange traded funds tell a story of renewed investorconviction. The table below shows how ETF positions have evolved:Holdings remain6% below pandemic highs, suggesting substantial upside potential if buyingcontinues. J.P. Morgan notes every 100 tonnes of net purchases byconviction buyers corresponds to a 1.7% rise in gold prices.Ole Hansen,commodities strategist at Saxo Bank, said the move above $4,000"reflects a deeper shift in investor psychology and globalcapital flows". He added that "sanctions, asset seizures, andconcerns about fiscal sustainability have nudged investors, both institutionaland sovereign, toward tangible assets that sit outside thefinancial system".Gold'sperformance since 1979's similar rally suggests the bull market mayhave substantial room to run. Historical patterns show goldfunctions better as long-term inflation hedge than short-termtactical play, with correlation to inflation rising from 0.16 overfive-year periods to 0.58 over twenty years.Whether goldconsolidates near $4,000 or powers toward $5,000 depends on Fed policy,geopolitical developments, and whether the structural shift away fromdollar assets accelerates. What's clear is that gold has reclaimed its positionat the center of global monetary discussions after decades as anafterthought.Gold Price Analysis, FAQIs gold price expected torise or drop?Gold isexpected to continue rising based on consensus analyst forecasts. Goldman Sachsprojects $4,900 by December 2026, while other major institutions includingDeutsche Bank, UBS, and Commerzbank forecast targets between $4,200 and $4,300over the same period. What will the price ofgold be in 2025?Gold hasalready surpassed most 2025 forecasts by reaching $4,042 in October, well abovethe $3,400-$3,700 range predicted by major banks earlier this year. The currentprice represents a 52% gain year-to-date, making gold one of 2025'sbest-performing assets. Analysts now expect gold to average between $3,800 and$4,000 for the remainder of 2025, with potential spikes above $4,100 if Fedrate cuts accelerate or geopolitical tensions intensify. Will gold go to $5,000 anounce?Yes, multipleanalysts believe gold will reach $5,000, though timelines vary. Goldman Sachssees potential for $5,000 if Federal Reserve independence comes under pressureand investors shift just 1% of the $57 trillion U.S. Treasury market into gold.Ed Yardeni predicts $5,000 by end of 2026 under current conditions, calling itthe "next big round number" that markets will target. Will the price of gold goup in the next 5 years?Long-termforecasts through 2030 show strong consensus for continued gains. Analystsproject gold reaching $4,500-$5,000 by 2027-2028 in medium-term scenarios, withpotential to hit $5,150-$5,800 by 2030 under optimistic conditions. EdYardeni's most aggressive forecast sees $10,000 by 2030, implying 151% gainsover five years, though this requires extreme scenarios including runawayinflation or severe geopolitical crises.You may also like:This article was written by Damian Chmiel at www.financemagnates.com.