The bank estimates that "structurally higher central bank demand will add 9% to the gold price by year-end, which combined with a gradual boost to ETF holdings as the funds rate declines."

This should outweigh the drag from normalizing investor positioning, assuming uncertainty diminishes, Goldman Sachs added.

However, if policy uncertainty, including tariff concerns, remains high, Goldman sees the potential for gold to surge to $3,300 per ounce by year-end due to prolonged speculative positioning.

The bank has also revised its central bank demand assumption upward to 50 tonnes per month from the previous estimate of 41 tonnes.

If purchases average 70 tonnes per month, gold prices could climb to $3,200 per ounce by the end of 2025, assuming positioning normalizes, Goldman said.

Conversely, if the Federal Reserve keeps interest rates steady, the bank expects gold to reach $3,060 per ounce in the same period, the bank added.

Reiterating its "Go for Gold" trading recommendation, Goldman Sachs said that while declining uncertainty could lead to a tactical pullback in prices, long gold positions remain a strong hedge.

This is particularly relevant in the face of potential trade tensions, Federal Reserve subordination risks, and financial or recessionary threats, which could push prices toward the upper end of Goldman's high-uncertainty range, the bank said.

Additionally, if concerns over U.S. fiscal sustainability escalate, Goldman Sachs sees gold rising an extra 5% to $3,250 per ounce by December 2025.

Growing fears of inflation and fiscal risks could drive speculative positioning and ETF flows higher, while worries about U.S. debt sustainability may encourage central banks, especially those with large U.S. Treasury reserves, to increase their gold purchases, the investment bank added.