Goldman Sachs Increases Gold Price Forecast for Early 2025

Goldman Sachs has adjusted its gold price forecast for early 2025, increasing it from $2,700 to $2,900 per troy ounce. This revision is based on two main factors.

Firstly, the firm expects a quicker decline in short-term interest rates in Western nations and China. They believe that the gold market has not adequately accounted for the potential increase in Western ETF holdings that are backed by physical gold, which typically occurs gradually.

Secondly, there has been a continued strong demand from emerging market central banks in the London over-the-counter market. This trend is thought to sustain the gold rally that began in 2022, with strategists predicting that these purchases will remain at elevated levels.

Goldman’s nowcasting tool, which provides up-to-date monthly data, indicates that central bank and institutional demand for gold in the London OTC market has been robust. As of July, gold purchases have averaged 730 tons on an annual basis, which represents about 15% of global annual production estimates.

A significant contributor to this demand has been China. The nowcast provides estimates that align closely with those of the World Gold Council while offering advantages such as monthly updates, transparency at the country level, and reliance on customs data and institutional insights.

In addition to raising the price forecast, Goldman Sachs reaffirmed its strong recommendation for gold investments. They cite the expected gradual increase from lower global interest rates, the sustained high demand from central banks, and gold’s traditional role as a safeguard against geopolitical, financial, and recession risks.

Currently, gold prices are hovering just below their record highs. This follows comments from U.S. Federal Reserve Chair Jerome Powell, who suggested that significant interest rate cuts this year are unlikely. Investors are now looking forward to forthcoming labor data for additional insights.

Powell indicated that the Fed is likely to implement smaller, quarter-percentage-point rate reductions and stressed that the central bank is not rushing to lower rates, especially in light of data that suggest optimism in economic growth and consumer spending.