Goldman Sachs raises its gold price forecast for early 2025 by Investing.com

Investing.com — Goldman Sachs on Monday raised its gold price forecast for early 2025 to $2,900 per troy ounce (toz) from $2,700/toz previously, citing two main reasons.

First, they anticipate faster declines in short-term interest rates in Western countries and China, adding that the gold market “has not yet fully priced in the rate hike for physical gold-backed Western ETF holdings, which tends to be gradual.” .

Second, ongoing robust purchases by emerging market (EM) central banks on the London Stock Exchange (OTC) are expected to continue fueling gold’s rally that began in 2022. Strategists believe “that these purchases will remain structurally high”.

Goldman’s nowcasting tool, which provides timely monthly data, shows that demand for central bank and institutional gold in London’s OTC market has remained strong. Through July, purchases averaged 730 tonnes on an annual basis, representing about 15% of global annual production estimates.

China has been a major contributor to this demand, with supply estimates over time comparable to those of the World Gold Council (WGC). However, nowcast has advantages such as monthly updates, country-level transparency, and the use of customs data and institutional knowledge to inform its estimates.

Goldman Sachs also reiterated its long recommendation on gold, citing expected gradual growth from lower global interest rates, structurally higher demand from central banks and gold’s traditional role as a hedge against geopolitical, financial and recessionary risks.

Gold prices remained just below an all-time high on Tuesday after US Federal Reserve Chairman Jerome Powell played down the likelihood of significant interest rate cuts this year. Investors are now awaiting future labor data for further information.

Powell said Monday the Fed would likely continue with smaller, quarter-percentage-point rate cuts and stressed the central bank was in no rush to cut rates after data bolstered optimism about economic growth and consumer spending.