Goldman Sachs Raises Gold Price Forecast to $2,900 per Troy Ounce for 2025
Goldman Sachs recently revised its gold price forecast for early 2025, projecting the price to reach $2,900 per troy ounce. This upward adjustment is driven by two main factors that are expected to influence the gold market in the coming years.
Anticipated Declines in Short-Term Interest Rates
One key reason behind the revised forecast is the projected faster declines in short-term interest rates in Western countries and China. Goldman Sachs believes that the gold market has yet to fully price in the potential boost to Western ETF holdings backed by physical gold resulting from these interest rate adjustments, which are expected to occur gradually.
Emerging Market Central Bank Purchases Fueling Gold Rally
Another factor contributing to the optimistic gold price forecast is the ongoing robust purchases by emerging market central banks in the London over-the-counter market. This trend is projected to continue supporting the gold rally that began in 2022, with strategists expecting the elevated purchasing activity to persist.
Insight into Central Bank and Institutional Demand
Goldman Sachs’s nowcasting tool, which provides timely monthly data, indicates strong central bank and institutional demand for gold in the London OTC market. The tool has shown that purchases have averaged 730 tons on an annualized basis through July, accounting for a significant portion of global annual production estimates.
China’s Contribution to Gold Demand
Notably, China has played a significant role in driving this demand, with the nowcast offering estimates that align closely with those of the World Gold Council. The tool’s advantages include monthly updates, country-level transparency, and the utilization of customs data and institutional knowledge to inform its estimates.
Long Gold Recommendation and Market Conditions
In addition to the price forecast adjustment, Goldman Sachs reiterated its long gold recommendation. The recommendation is based on expectations of a gradual boost from lower global interest rates, sustained demand from central banks, and the enduring role of gold as a hedge against various risks, including geopolitical, financial, and recessionary uncertainties.
Market Response to Powell’s Comments
Following U.S. Federal Reserve Chair Jerome Powell’s comments about the potential for smaller, quarter-percentage-point rate cuts, gold prices remained near their all-time high. Powell emphasized that the Fed is not rushing to reduce rates, citing positive economic growth and consumer spending data as reasons for caution.
Looking Ahead: Labor Data and Future Insights
Investors are now focused on upcoming labor data to gain further insights into the economic outlook. As market participants digest Powell’s remarks and assess the data releases, the trajectory of gold prices in the near term will likely be influenced by evolving market conditions and economic indicators.
