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Key Takeaways
- Goldman Sachs predicts gold will hit $4,900 per troy ounce by year-end due to high central bank demand.
- Central banks are buying 50 tonnes monthly, up 300% from pre-2022 levels to hedge geopolitical risk.
- Paused Fed rate hikes and fiscal debasement fears are spurring both institutional and private buying.
Goldman Sachs: Gold to Rise to $4,900 on Central Bank Demand With Limited Debasement Trade Support
Analysts believe that gold, which has shown increased volatility this week, will keep rising this year on structural demand.
Lina Thomas, senior commodities analyst at Goldman Sachs Research, and Daan Struyven, co-head of Global Commodities Research, predict the precious metal will rise to $4,900 per troy ounce by year-end, pushed by increased demand from central banks.
Analysts predict that demand for reserve diversification and a scaling back of expectations for rate hikes in the U.S. will contribute to this price rise.
“We continue to see elevated central bank gold accumulation as a multi-year trend, as central banks diversify their reserves to hedge geopolitical and financial risks, consistent with recent survey evidence,” said Thomas and Struyven.
They expect central banks to purchase 50 tonnes per month this year. This represents an increase of almost 300% from 17 tonnes per month before 2022, highlighting the relevance of the precious metal during current geopolitical and economic realities.
In June, Goldman Sachs found that central banks purchased 100 tonnes on average, a significant rise from May figures, which reached 66 tonnes.
Goldman Sachs stressed that they expected “Fed-related headwind to abate further, as our economists expect a lower inflation trend to keep the Fed on hold this year.” This means investors will be lured to gold in a stable rate environment, given that the metal tends to perform well in these scenarios.
The so-called “debasement trade” narrative was also considered a medium-term factor that could push gold prices higher than the forecasted level.
“Gold’s share in private portfolios remains low, and recent geopolitical developments—including Iran and broader tensions—may accelerate diversification beyond central banks to private investors, including by weighing on perceptions of Western fiscal sustainability,” analysts concluded.
