Goldman Sachs Raises Gold Price Forecast to $2,900 by Early 2025
Goldman Sachs has revised its gold price forecast for early 2025, now predicting a price of $2,900 per troy ounce, up from the previous forecast of $2,700. This upward revision is based on two main factors that the investment bank believes will drive the price of gold higher in the coming years.
Faster Declines in Short-Term Interest Rates
One key reason for the revised forecast is the expectation of faster declines in short-term interest rates in Western countries and China. Goldman Sachs points out that the gold market has not fully priced in the potential boost to Western ETF holdings backed by physical gold that could result from these rate cuts. This gradual shift in interest rates is seen as a positive driver for gold prices.
Emerging Market Central Bank Purchases
Another factor contributing to the bullish outlook on gold is the continued robust purchases by emerging market central banks in the London over-the-counter market. These purchases are expected to fuel the gold rally that began in 2022, with strategists predicting that the elevated levels of buying will persist. This consistent demand from central banks is viewed as providing strong support for gold prices in the long term.
Insight on Central Bank and Institutional Demand
Goldman Sachs has been closely monitoring central bank and institutional demand for gold through its nowcasting tool, which provides up-to-date monthly data. The data shows that purchases of gold in the London OTC market have remained strong, averaging 730 tons on an annualized basis. This level of buying represents about 15% of global annual production estimates, highlighting the significant influence of central bank and institutional demand on the gold market.
China’s Role in Gold Demand
China has been a notable contributor to the overall demand for gold, with its purchases aligning closely with estimates from the World Gold Council. The nowcasting tool employed by Goldman Sachs offers additional advantages, such as monthly updates, transparency at the country level, and the use of customs data and institutional knowledge to inform its estimates. This detailed analysis helps provide a more nuanced understanding of the factors shaping gold demand.
Goldman Sachs Reiterates Long Gold Recommendation
Despite the potential headwinds from the U.S. Federal Reserve’s cautious stance on interest rate cuts, Goldman Sachs maintains its long gold recommendation due to the anticipated benefits from lower global interest rates, sustained demand from central banks, and gold’s traditional role as a hedge against various risks. These factors continue to support the positive outlook for gold prices in the years ahead.
Market Response to Powell’s Comments
Following U.S. Federal Reserve Chair Jerome Powell’s remarks downplaying the likelihood of significant interest rate cuts, gold prices remained near their all-time high. Investors are now closely watching upcoming labor data for further insights into the economic landscape. Powell’s emphasis on smaller rate cuts and the Fed’s cautious approach reflect optimism in economic growth and consumer spending, impacting market expectations for gold prices.
