Goldman Sachs has doubled down on its bullish stance on gold, citing increased central bank demand and the anticipated US Federal Reserve interest rate cut. Despite acknowledging some potential near-term downside to gold prices, the investment bank maintains its long gold trading recommendation and its price target of $2,700/oz by early 2025. This comes as the price of gold hits new all-time highs, reaching $2,589.60 on the spot market.
Gold is traditionally considered a safe haven asset, serving as a hedge against inflation and economic uncertainty. With a potential US recession looming and the Fed shifting towards more accommodative monetary policies, investor interest in gold is expected to remain robust, further fueled by buying from foreign central banks, particularly China. The anticipated Fed rate cuts could lead to lower bond yields, making gold even more appealing due to its lack of interest generation.
While bullish on gold, Goldman Sachs recently downgraded its iron ore price forecast. The investment bank slashed its fourth-quarter 2024 projection by $15 per metric ton, lowering it to $85 due to concerns of oversupply, even with stabilizing demand from China. Despite China’s efforts to stimulate the economy and boost steel demand, the broader economic slowdown and the real estate crisis have dampened demand for iron ore. Iron ore futures have dipped below $90, reaching their lowest point in almost two years.
Goldman acknowledges the potential for short-term support due to restocking ahead of the October holiday week. However, the continued buildup of iron ore inventories is likely to drive prices further down. The supply-demand imbalance remains a key issue for the market, with major players like Brazil’s Vale and Australia’s BHP maintaining production levels. Kallanish Consulting analyst Ian Roper explained the current price dynamics for Bloomberg: “We need to eliminate about 100 million tons to balance this market, and to do that, we need prices to settle in the $80s.”
