Goldman Sachs Raises Gold Price Forecast to $2,900 Per Ounce by Early 2025
Goldman Sachs has revised its gold price forecast for early 2025 to $2,900 per troy ounce (toz), up from the previous estimate of $2,700/toz. This upward revision is attributed to two key factors.
Anticipated Declines in Short-Term Interest Rates
Firstly, Goldman Sachs anticipates faster declines in short-term interest rates in Western countries and China. They point out that the gold market has not fully factored in the potential rates boost to Western ETF holdings backed by physical gold, which is expected to occur gradually. This could have a significant impact on the price of gold in the coming years.
Robust Purchases by Emerging Market Central Banks
Secondly, ongoing robust purchases by emerging market (EM) central banks in the London over-the-counter (OTC) market are expected to continue supporting the gold rally that began in 2022. According to strategists, these purchases are projected to remain structurally elevated, contributing to the overall demand for gold.
Goldman Sachs’ nowcasting tool, which provides timely monthly data, indicates that central bank and institutional demand for gold in the London OTC market remains strong. As of July, annualized purchases have averaged 730 tons, accounting for approximately 15% of global annual production estimates.
China has been a significant contributor to this demand, with the nowcasting estimates aligning closely with those of the World Gold Council (WGC). The nowcasting tool boasts advantages such as monthly updates, country-level transparency, and the use of customs data and institutional knowledge to inform its estimates.
Long Gold Recommendation
Goldman Sachs reaffirmed its long gold recommendation, emphasizing the anticipated gradual boost from lower global interest rates, the structurally higher demand from central banks, and the traditional role of gold as a hedge against geopolitical, financial, and recessionary risks.
Following U.S. Federal Reserve Chair Jerome Powell’s remarks downplaying the likelihood of significant interest rate cuts this year, gold prices remained close to their all-time high on Tuesday. Investors are now looking to upcoming labor data for further insights into the market.
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Additional Insight:
It is worth noting that the forecasted increase in gold prices by Goldman Sachs reflects a positive outlook for the precious metal, driven by a combination of factors such as central bank demand, interest rate trends, and geopolitical uncertainties. This serves as a validation of gold’s status as a reliable asset for investors seeking stability and wealth preservation amid market volatility.
