Matter-wave interferometry with atoms propagating in a guiding potential is expected to provide compact, scalable and precise inertial sensing. However, a rotation sensing device based on the Sagnac effect with atoms guided in a ring has not yet been implemented despite continuous efforts during the last two decades. Here we discuss some intrinsic effects that limit the coherence in such a device and propose a scheme that overcomes these limitations and enables a multi-pass guiding Sagnac interferometer with a Bose-Einstein condensate (BEC) on a chip in a ring potential. We analyze crucial dephasing effects: potential roughness, phase diffusion due to atom-atom interactions and number uncertainty, and phase fluctuations. Owing to the recent progress in achieving high momentum beam splitting, creating smooth guides, and manipulating the matter-wavepacket propagation, guided interferometry can be implemented within the coherence time allowed by phase diffusion. Despite the lower particle flux in a guided Sagnac ring and the miniaturization of the interferometer, the estimated sensitivity, for reasonable and practical realizations of an atom chipbased gyroscope, is comparable to that of free-space interferometers, reaching 45 nrad s -1 Hz -1/2 . A significant improvement over state-of-the-art free-space gyrocope sensitivities can be envisioned by using thermal atoms instead of a BEC, whereby the interferometer can be operated in a continuous fashion with the coherence limited by the scattering rate of the atoms with the background gas. Taking into account the sensitivity times length of the interferometer as the figure of merit which takes into account compactness, our configuration is expected to deliver a potential improvement of 2-4 orders of magnitude over state-of-the-art free-space gyroscopes for a BEC, and 4-6 orders of magnitude for thermal atoms.