Goldman Sachs Raises Gold Price Forecast for 2025

Goldman Sachs on Monday increased its gold price forecast for early 2025 to $2,900 per troy ounce from the previous $2,700 citing two main reasons.

Reasons for the Increase

1. Interest Rate Declines: Goldman anticipates quicker declines in short-term interest rates in Western countries and China. The firm notes 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.”

2. Emerging Market Central Bank Purchases: The strong purchasing activity by emerging market (EM) central banks in the London over-the-counter (OTC) market is expected to further drive the gold rally that began in 2022. Strategists believe purchases will remain “structurally elevated.”

Demand and Nowcasting Tool

Goldman’s nowcasting tool indicates robust demand for gold in the London OTC market. Through July, purchases averaged 730 tons annually, about 15% of global production estimates. Notably, China has contributed significantly to this demand.

Long-Term Outlook

Goldman Sachs reaffirmed its long gold recommendation, citing:
– Gradual boosts from lower global interest rates
– Continued high demand from central banks
– Gold’s traditional role as a hedge against geopolitical, financial, and recessionary risks.

Current Gold Prices

Gold prices remained just under their all-time high following comments from U.S. Federal Reserve Chair Jerome Powell, who downplayed significant interest rate cuts this year. Investors are now looking forward to upcoming labor data for further insights.

Powell indicated that the Fed might implement smaller, quarter-percentage-point rate cuts and emphasized they are not “in a hurry” to reduce rates, following data showing optimism in economic growth and consumer spending.