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Goldman Sachs on Monday raised its gold price forecast to $2,900 per ounce from $2,700 per ounce for early 2025 citing gradually rising ETF flows with interest rate cuts in the West and China, and higher central bank purchases.
"We reiterate our long gold recommendation due to the gradual boost from lower global interest rates, structurally higher central bank demand and gold's hedging benefits against geopolitical, financial, and recessionary risks," the bank said in a note.
Spot gold prices rose to all-time highs of $2,685.42 per ounce last week and was on track for its best quarter since 2020 fuelled by the US Federal Reserve's half-percentage-point cut and flare-ups in the Middle East.
Gold, used as a safe investment during times of political and financial uncertainty, tends to appreciate on expectations of lower interest rates.
Goldman Sachs raised their 2024 average gold price forecast to $2,395 per ounce from $2,357 per ounce and 2025 outlook to $2,973 per ounce from $2,686 per ounce.
"Our nowcast of central bank and other institutional demand in the London over-the-counter (OTC) market shows that purchases remained strong through July, averaging 730 tons annualized year-to-date, or about 15% of global annual production estimates, with a large contribution from China," Goldman said.
Moderating but still significant central bank purchases on the London OTC market could drive about 2/3 of the expected rise of the gold price to $2,900 per ounce in early 2025, the bank said.
The gradual rise in exchange-traded fund flows following the Fed rate cuts expected to drive the remaining 1/3 of price upside, analysts at Goldman said.