FX.co ★ Gold is on rise

The precious metal market is buzzing. Gold, in particular, is shining joyfully as Goldman Sachs has revised its price forecast upward. Congratulations, yellow metal!

According to the bank’s analysts, gold is expected to jump to $2,900 per troy ounce by early 2025, up from the current $2,700. There are two main reasons for such a jump. First, Goldman Sachs anticipates a quicker-than-expected decrease in interest rates in Europe and China. Additionally, they emphasize that the gold market has not yet fully priced in the gradual increase in rates for Western ETFs backed by physical gold.

Second, currency strategists believe that the central banks of emerging markets (EM) will continue their strong gold-buying spree, which started in 2022. Goldman Sachs believes these purchases will remain “structurally high.”

Their forecasting tool, which provides fresh monthly data, shows that demand for gold from regulators and institutional investors in the over-the-counter market in London remains strong. As of July 2024, gold purchases reached an annualized total of 730 tons, about 15% of the world’s annual production. China, with its traditionally high level of purchases, played a significant role in this demand.

Goldman Sachs’ forecast, which aligns with data from the World Gold Council (WGC), suggests that investor interest in the yellow metal will continue to be fueled by global geopolitical instability and a desire to safeguard capital.

Currency strategists at Goldman Sachs also reaffirmed their recommendation for long positions in gold. They predict that the precious metal will continue its steady rise, buoyed by falling global interest rates and strong demand from central banks. After all, gold has always been the go-to hedge against geopolitical, financial, and recession risks.