Goldman Sachs on Monday raised its gold price forecast for early 2025 to $2,900 per troy ounce (toz) from the previous $2,700/toz, citing two primary reasons.
Firstly, they anticipate faster declines in short-term interest rates in Western countries and China, adding that the gold market “doesn’t fully price in the rates boost to Western ETF holdings backed by physical gold yet, which tends to be gradual.”
Secondly, ongoing robust purchases by emerging market (EM) central banks in the London over-the-counter (OTC) market are expected to continue fueling the gold rally that began in 2022. Strategists believe “that these purchases will remain structurally elevated.”
Goldman’s nowcasting tool, which provides timely monthly data, shows that central bank and institutional demand for gold in the London OTC market has remained strong. Through July, purchases have averaged 730 tons on an annualized basis, accounting for about 15% of the global annual production estimates.
China has notably contributed to this demand, with the nowcast offering estimates comparable to those of the World Gold Council (WGC). However, the nowcast boasts 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 gold recommendation, citing the anticipated gradual boost from lower global interest rates, the structurally higher demand from central banks, and the traditional role of gold as a hedge against geopolitical, financial, and recessionary risks.
Gold prices remained just below their all-time high on Tuesday after U.S. Federal Reserve Chair Jerome Powell downplayed the likelihood of significant interest rate cuts this year. Investors now await upcoming labor data for further insights.
Powell said Monday that the Fed is likely to proceed with smaller, quarter-percentage-point rate cuts and emphasized that the central bank is not "in a hurry" to reduce rates, following data that reinforced optimism in economic growth and consumer spending.
