Oct 29 (Reuters) - Goldman Sachs has slightly lowered its gold forecast to $3000 by December 2025, maintaining its bullish stance, primarily driven by the robust demand for physical gold from financial and monetary authorities, investors, and speculators.

The investment bank, which previously saw gold at $3080 by the end of 2025, said it sees central bank demand due to fears of U.S. financial sanctions and shocks to U.S. sovereign debt pushing up the gold price by 9%.

Furthermore, the firm anticipates a 7% upside from Western Exchange-Traded Fund $(ETF.AU)$ holdings backed by physical gold as the Federal Reserve policy rate drops to 3.25%-3.50% by mid-next year.

Goldman Sachs said a fivefold increase in their view on central bank demand in the London OTC market since Russia invaded Ukraine had reset levels in the relationship between gold prices and interest rates.

The U.S. investment bank's "still bullish" prediction also factors in the role of speculators turning to gold as a safe haven, especially in the run-up to the U.S. elections on Nov. 5.

Despite acknowledging a potential downside price risk due to a decrease in speculative positioning post-election, the firm underscores the significant hedging value in long gold positions amid potential trade tensions and financial risks.

Spot gold prices hit a record high of $2,772.42 per ounce on Tuesday and have surged more than 34% so far this year.

While seeing gold hitting $3,000 by the end of 2025, Goldman lowered its forecast for average prices in 2025 to $2906 from $2973.

(Reporting by Anmol Choubey in Bengaluru; Editing by Sonali Paul)

((anmol.choubey@thomsonreuters.com;))