Goldman Sachs Predicts $2900 Gold Price for Next Year: Analysts Explain

Goldman Sachs announced on Monday that it has raised its gold price forecast by $200 per ounce to $2,900 per ounce by early 2025. The bank said in a report: "We reiterate our long-term recommendation for gold due to the decline in global interest rates, structurally rising central bank demand, and gold's hedging advantages against geopolitical, financial, and recession risks."

Goldman Sachs also raised its average gold price forecast for 2024 from $2,357 per ounce to $2,395 per ounce and its expectations for 2025 from $2,686 per ounce to $2,973 per ounce.

Goldman Sachs wrote: "Our latest forecast for central bank and other institutional demand in the London Over-The-Counter (OTC) market shows that as of July, purchases remain strong, with an average annual purchase of 730 tons so far this year, accounting for about 15% of the estimated global annual production, with significant contributions from China."

Analysts said that the "moderate but still significant" purchases by central banks in the London OTC market will lead to about two-thirds of the expected rise in gold prices to $2,900 per ounce by early 2025, and the gradual increase in exchange-traded fund flows following the Federal Reserve's interest rate cuts will drive the remaining one-third of the gold price increase.

This is a significant upgrade for gold, as less than a month ago, Goldman Sachs postponed its earlier price forecast of $2,700 from the fourth quarter of 2024 to the first quarter of 2025.

Despite having completed several commodity-focused investments, Goldman Sachs analysts wrote in a commodity update: "Gold is the commodity we are most confident about rising in the near term."

At that time, they said they continue to maintain a bullish target of $2,700 per ounce by early 2025 and proposed gold purchases for three reasons.

First, the analysts said they "believe that since mid-2022, central bank purchases have tripled due to concerns about U.S. financial sanctions and U.S. sovereign debt, which is structural and will continue regardless of whether it is reported or not."

Second, they said, "The Federal Reserve is about to cut interest rates, which will bring Western capital back to the gold market, something that has been largely absent from the significant rise in gold over the past two years."Finally, analysts stated that gold "provides significant hedging value for portfolios against geopolitical shocks, including tariffs, Fed subordinate risks, and debt concerns." They wrote: "Our analysis indicates that gold prices will rise by 15%, equivalent to the increase since 2021, under the assumption of increased financial sanctions, and gold prices will also rise by 15% if the U.S. CDS spread widens by 1." "That is to say, due to the Chinese market, which is particularly sensitive to prices, digesting the recent price increases, we adjust our target of $2,700 to early 2025, instead of the end of 2024 as before. However, we believe that the same price sensitivity can also prevent the hypothetical significant price drop, which could revive Chinese purchases."

Spot gold prices rose steadily overnight, reaching $2,671.82 before 10 a.m. Eastern Daylight Time, less than $11 from last week's historical high. On the daily chart, spot gold last traded at $2,660.92 per ounce, up 1.01%.