Goldman Sachs Research anticipates a bullish outlook for gold, projecting prices to reach $2,900 per ounce by early 2025, up from a prior forecast of $2,700. This optimism is largely attributed to a surge in gold purchases by central banks, especially in emerging markets. Traditionally, gold prices align closely with interest rate trends—lower rates often boost gold's appeal as a non-yielding asset. However, significant central bank buying since 2022 has shifted this dynamic, with Goldman estimating that an additional 100 tonnes of physical gold demand can lift prices by around 2.4%.
This surge in demand is partly driven by a desire for financial security, especially after the freezing of Russian central bank assets in 2022, which raised concerns over sanctions risks. Emerging market central banks, which typically have smaller gold reserves compared to developed nations, appear to be "catching up" as a buffer against potential geopolitical and fiscal risks. With the U.S. debt at 124% of GDP, policymakers are increasingly wary of overreliance on U.S. Treasury bonds.
Western investor interest in gold is also picking up, particularly in light of the upcoming U.S. presidential election and heightened concerns over trade tensions and fiscal stability. Although many investors are cautious about gold’s record-high prices, Goldman Sachs expects Western-held gold ETFs to gradually increase as interest rates fall, potentially leading to a competitive dynamic between central banks and investors for gold reserves.
