From the beginning of January 2024, the price of gold has surged, repeatedly shattering records. According to Goldman Sachs Research the gold rally is going to continue amid demands from central banks.
The price of the metal is predicted to jump to 8% further to $3,100 a troy ounce by the end of 2025, analyst Lina Thomas wrote in the team’s report.
There is a higher-than-expected demand for gold from central banks, and the increased forecast is underpinned by it. The central banks have also been increasing their reserves of the commodity ever since Russian central bank’s assets froze in 2022, following the Russian invasion of Ukraine, the report added.
Goldman Sachs research anticipates a boost to the gold price from increased purchases of gold ETFs as declining interest rates make gold a more attractive investment, the report added.
These factors, however, may somehow be offset by speculators reducing their net long positions on gold futures market, which is projected by Goldman Sachs to weigh on gold prices.
Currently, net long positions are very high as concerns of sustained tariffs from the Trump administration have been driving investors towards safe haven assets.
According to the report, the main driver of the higher forecast is the fact that central banks have been buying, which exceeded expectations in December.
Before Russian central bank assets froze in 2022, the average monthly institutional demand on the London over-the-counter gold market stood at 17 tonnes. This figure hit 108 tonnes in last December.
Consistently higher demand from central banks could raise the gold price by as much as 9%, Thomas added in the report.
