Goldman Sachs Reiterates Optimistic Outlook on Gold Prices

(Reuters) – Goldman Sachs reiterated its optimistic outlook on gold prices on Monday, citing central bank demand and the imminent interest rate cut from the U.S. Federal Reserve at its policy meeting this week.

Gold prices rose to an all-time high at $2,589.6 an ounce on Monday, supported by a weaker dollar and the prospect of a significant rate reduction by the Fed.

Markets are currently pricing in a 33% chance of a 25-basis-point U.S. rate cut at the Fed’s Sept. 17-18 meeting, and a 67% chance of a 50-bps cut, as indicated by the CME FedWatch tool.

“While we see some tactical downside to gold prices under our economists’ base case of a 25bp Fed cut on Wednesday, we reiterate our long gold trading recommendation and our price target of $2,700/toz by early 2025,” the investment bank stated in a note.

Goldman Sachs highlighted that structurally higher demand from central banks has reset the relationship at the price level, while changes in interest rates continue to drive fluctuations in gold prices.

It also noted that exchange-traded funds backed by physical gold are consistently rising as the Federal Reserve’s policy rate diminishes.