Goldman Sachs went on to say in a report that it expects gold prices to continue to hit new all-time highs in early 2025, extending its record-breaking rally, and noted that in addition to rising geopolitical tensions (which favor safe-haven assets such as gold), there are two factors that will drive gold prices further up - lower interest rates and seemingly insatiable demand for gold from central banks in emerging market countries.
Goldman Sachs raised its gold price target to $2,900 an ounce from $2,700, implying a gain of about 9% from current levels. Such a gain would be on top of the 29% gain in prices so far this year.
Spot gold climbed above the $2,660 mark on Friday, supported by safe-haven demand triggered by the conflict in the Middle East.
Geopolitical tensions, especially between Israel and Iran, are supporting gold prices, and unless those risks recede, prices are likely to remain near record levels, said Ajay Kedia, director at Kedia Commodities in Mumbai.
“We reiterate our long-term bullish call on gold, driven by a gradual boost from lower global interest rates, structurally higher central bank demand, and gold’s safe-haven role against geopolitical, financial and recession risks,” said Lina Thomas, commodities strategist at Goldman Sachs.
It is worth noting that Goldman Sachs has published bullish reports on gold several times this year. Goldman Sachs analysts previously pointed out that since gold is the preferred risk hedging tool, it is most likely to rise in prices in the near term, while other commodities are "more selective and less constructive."
Goldman Sachs emphasized that since 2022, central banks in emerging market countries such as China have been the driving force behind the structural rise in gold prices. Goldman Sachs estimates that from January to July this year, institutional demand in the London OTC market was strong, with annualized gold purchases averaging 730 tons, which accounts for about 15% of the world's annual gold production. Thomas said:
“Central bank buying in the London OTC market is slowing but still elevated, driving about two-thirds of the projected rise in gold prices to $2,900 an ounce by early 2025.”
In addition to falling interest rates and strong central bank demand, investors are likely to keep gold at the forefront given the numerous risks currently in the market, such as the upcoming US presidential election, a potential war between Israel and Iran, and the impact of several days of East Coast port strikes on data.
Later in the day, the U.S. will release the latest non-farm payrolls data, and New York Fed President John Williams and Chicago Fed President Andre Goolsbee are also scheduled to speak later in the day.
Kedia added that if the nonfarm payrolls report is strong, it would be positive for the dollar and gold prices could see some profit-taking. According to CME Group’s FedWatch tool, traders see a 69% chance that the Fed will cut interest rates by 25 basis points in November.
The article is forwarded from: Jinshi Data
