Goldman Sachs Raises 12-Month Gold Price Forecast to $2,700 Amid Increased Demand from Central Banks and Investors
Originally reported by Dean Crossley for Futunn News
Goldman Sachs has significantly revised its 12-month gold price forecast, projecting a new target of $2,700 per ounce. This marks a bullish shift in the investment bank’s view as demand continues to surge among investors and central banks alike. The updated outlook, announced in late May 2024, reflects both cyclical and structural drivers that are expected to support the precious metal through the coming year.
Key Drivers Behind the New Forecast
Goldman Sachs identifies several factors responsible for the ongoing rally in gold prices. These include rising geopolitical risks, persistent uncertainty over inflation and interest rates, and unprecedented buying activity among central banks. In addition, structural shifts in the global financial landscape are prompting investors to seek safer assets with long-term value preservation.
According to the bank, much of the recent price action in gold has not been led by traditional futures trading or ETF flows. Instead, a new era of gold accumulation is being driven by strong physical demand, particularly from governments and high-net-worth individuals.
Highlights from Goldman Sachs’ Bullish Gold Outlook
In its updated report, Goldman Sachs points to several developments shaping its forecast:
– The 12-month gold price target has been raised from $2,300 per ounce to $2,700 per ounce
– Analyst view sees gold “in the early stages of a new bull market”
– Demand rooted in long-dated and persistent buying activity
– Central banks have emerged as key drivers of physical gold purchases
– “Wealth preservation” is now seen as a primary investment motive for acquiring gold
– The current cycle differs from previous periods dominated by ETF and futures-based demand
Investor Perspective: Gold as a Strategic Hedge
Gold remains a core component of many institutional and individual portfolios, acting as a hedge against inflation, currency depreciation, and systemic financial risks. Investor positioning, according to Goldman Sachs, is now more strategic than opportunistic.
Key investor motivations include:
– Portfolio diversification in an unstable macro environment
– Hedging against fiat currency devaluation
– Protection from inflationary pressures and persistent rate volatility
– Navigating geopolitical risks and regional conflicts
– Anticipation of future monetary easing and lower real interest rates
Unlike the 2020 gold rally, which was largely driven by ETF inflows and monetary policy easing during the COVID-19 crisis, the current gold market is being supported by more durable sources of demand.
Remarkable Central Bank Activity
One of the most notable features of the current gold market is the magnitude and consistency of central bank gold purchases. In 2023 and early 2024, central banks across developing and emerging markets have continued to accumulate gold at a record pace.
Goldman’s analysis identifies several motivations behind these purchases:
– Reducing reliance on the U.S. dollar in official reserves
– Diversifying away from dollar-denominated assets and sanctions risk
– Increasing trust in gold as a reserve asset amid operating in a multipolar currency environment
Highlights from recent central bank buying activity:
– China has continued adding gold to its reserves for 18 consecutive months through May 2024
– Other major buyers include countries like India, Turkey, Singapore, and Kazakhstan
– Official sector purchases contributed significantly to price resilience even during periods of tightening monetary policy
Soft Landing and Monetary Policy Easing to Support Gold
Goldman Sachs maintains that the U.S. Federal Reserve and other central banks are approaching the end of their rate hiking cycles. This, combined with signals that global economies may achieve soft landings, is expected to support demand for non-yielding assets like gold.
Key considerations include:
– Declining real interest rates would enhance gold’s appeal
– A more accommodative monetary stance is seen as bullish for commodities tied to inflation protection
– Fragile global growth dynamics and lingering debt concerns prompt a search for alternative stores of value
While speculative
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