Goldman Sachs Raises Gold Price Forecast to $2,900 by 2025, Here's Why
In a bold move, Goldman Sachs has revised its gold price forecast for early 2025 to $2,900 per troy ounce (toz), up from the previous projection of $2,700/toz. This decision is based on two key factors that are expected to drive the price of gold higher in the coming years.
Firstly, the investment bank anticipates a faster decline in short-term interest rates in Western countries and China. They believe that the gold market has not fully priced in the potential boost to Western ETF holdings backed by physical gold, which is expected to be gradual.
Secondly, ongoing robust purchases by emerging market central banks in the London over-the-counter market are set to continue fueling the gold rally that began in 2022. Strategists predict that these purchases will remain at elevated levels, contributing to the overall demand for gold.
Goldman's nowcasting tool, which provides monthly data, indicates that central bank and institutional demand for gold in the London OTC market has remained strong. Through 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 estimates from the nowcast aligning closely with those of the World Gold Council. The tool offers advantages such as monthly updates, country-level transparency, and the use of customs data and institutional knowledge to inform its estimates.
Goldman Sachs reaffirmed its long gold recommendation, highlighting the expected gradual boost from lower global interest rates, sustained demand from central banks, and the traditional role of gold as a hedge against various risks.
As gold prices hover near their all-time high, investors are closely monitoring comments from U.S. Federal Reserve Chair Jerome Powell. Powell recently indicated that the Fed is likely to implement smaller, quarter-percentage-point rate cuts and emphasized a cautious approach, citing optimism in economic growth and consumer spending.
In conclusion, the revised gold price forecast from Goldman Sachs reflects their bullish outlook on the precious metal. Investors may consider adding gold to their portfolios as a hedge against geopolitical, financial, and recessionary risks, especially in a climate of lower interest rates and strong central bank demand. Stay tuned for further developments in the gold market as global economic conditions evolve.
