Reuters reporting on Goldman Sachs reiterating its optimistic outlook on gold prices. GS cite:
- central bank demand
- imminent interest rate cut from the U.S. Federal Reserve
- "While we see some tactical downside to gold prices under our economists' base case of a 25bp Fed cut on Wednesday, we reiterate our long gold trading recommendation and our price target of $2,700/toz by early 2025"
Goldman Sachs note:
- structurally higher demand from central banks
- changes in interest rates continue to drive fluctuations in gold prices
- exchange-traded funds backed by physical gold are consistently rising as the Federal Reserve's policy rate diminishes
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In the note the GS view reiterates GS noted further:
- Since Russia’s invasion of Ukraine in 2022, central banks have been buying gold at a brisk pace — roughly triple the amount prior. Goldman Sachs Research expects the buying spree to persist amid concerns about US financial sanctions and the growing US sovereign debt burden.
- Higher interest rates tend to make gold, which doesn’t offer a yield, less attractive to investors. Rate cuts by the Fed will likely bring Western investors back into the gold market after largely being absent during the metal’s sharp rally over the past two years.
- Potential geopolitical shocks: Gold offers significant value as a portfolio hedge against developments such as tariffs, Fed subordination risk (i.e., the risk that Fed independence may be undermined), and debt sustainability fears.
Bolding is mine, 5 points at my count.