Goldman Sachs has revised its gold price projection for early 2025, raising it to $2,900 per troy ounce (toz) from the previous forecast of $2,700/toz. The upward adjustment is attributed to two main factors.
The first reason is the expectation of quicker reductions in short-term interest rates across Western economies and China. According to Goldman Sachs, the market has yet to fully account for the impact of these rate cuts on gold-backed ETFs in Western markets, which could potentially see a steady increase in holdings.
The second driving factor is the continued strong demand from emerging market central banks, especially in the London over-the-counter (OTC) gold market. Analysts at Goldman Sachs predict that this demand, which has been a key component in the gold rally since 2022, will persist at elevated levels.
A key insight comes from Goldman’s nowcasting tool, which provides timely monthly data on central bank and institutional gold demand in the London OTC market. As of July, the annualized demand averaged around 730 tons, representing approximately 15% of the world’s annual gold production. This strong demand is primarily driven by China, and Goldman’s nowcast tool offers comparable estimates to those from the World Gold Council (WGC), with additional benefits such as monthly updates and detailed country-level insights.
Goldman Sachs continues to recommend holding gold, citing expectations of increased support from lower global interest rates, sustained central bank demand, and the precious metal’s traditional role as a safe haven asset against financial instability, geopolitical tensions, and recession risks.
As of Tuesday, gold prices were trading just below their record highs after Federal Reserve Chair Jerome Powell signaled a cautious approach towards rate cuts, stating that the central bank is not in a rush to implement aggressive monetary easing measures. Investors are now focused on the upcoming labor market data for further guidance on economic trends.
