Goldman Sachs is bullish on gold, projecting a surge in prices to $2,700 per troy ounce by early 2025. The investment bank, in a recent note, cites strong central bank demand and expected Federal Reserve rate cuts as key drivers for this optimistic outlook. They view gold as a prime asset in the near term, emphasizing its role as a “preferred hedge against geopolitical and financial risks.” This sentiment is supported by gold’s impressive performance year-to-date, with a 21% rally, outperforming the tech-heavy Nasdaq 100 index.
Goldman Sachs maintains its $2,700 price target, now anticipating it to be reached by early 2025, a slight adjustment from their previous year-end 2024 projection. Analyst Samantha Dart has also opened a long gold trading recommendation, underpinned by several bullish factors:
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Central Bank Demand:
Central banks have been significant drivers of increased gold demand since mid-2022. Dart highlights that the “tripling in central bank purchases since mid-2022 on fears about U.S. financial sanctions and U.S. sovereign debt is structural and will continue, reported or unreported.” This trend is expected to persist, potentially boosting gold prices further if new geopolitical or financial shocks arise.*
Fed Rate Cuts:
Anticipated Federal Reserve rate cuts are expected to attract Western capital back into the gold market, a factor that was largely absent during the recent sharp gold rally. This influx of capital could further propel gold prices upwards.*
Hedge Against Geopolitical Risks:
Gold remains a valuable safe haven asset, acting as a hedge against geopolitical shocks, including tariffs, potential Fed subordination risks, and debt fears.While Goldman Sachs acknowledges the influence of the price-sensitive Chinese market, which has slightly tempered their timeline for reaching the $2,700 target, they believe this sensitivity will also “insure against hypothetical large price declines.” Lower prices would likely trigger renewed buying interest from Chinese investors.
September, traditionally a volatile period for U.S. equities, further strengthens the case for gold. The World Gold Council notes that gold’s historically strong negative correlation during equity sell-offs should sustain investor interest. This is especially relevant considering the elevated uncertainty and event risk, making gold attractive to investors seeking safety.
Historically, September has been a positive month for gold. Over the past 48 years, the metal has posted an average gain of 0.63% in September, making it one of gold’s strongest months, trailing only August and January. This historical trend, coupled with the anticipated volatility in the equity market, suggests that investors may turn to gold as a safe-haven asset during this typically challenging month.
