Goldman Sachs Raises Year-End Gold Forecast to $3,300 on Central Bank Demand

Gold prices have received a significant boost as major financial institutions continue to express bullish sentiments. Following bank of america, goldman sachs has raised its year-end forecast for gold prices to $3,300 per ounce. This upward revision is driven by stronger-than-anticipated demand from central banks and robust inflows into gold-backed exchange-traded funds (ETFs).

Goldman Sachs' move underscores a growing consensus among major financial institutions that gold remains a highly attractive investment. The firm's analysts cited the unexpected surge in central bank purchases as a key factor influencing their revised outlook. Central banks, traditionally significant players in the gold market, have been increasing their holdings at a pace that exceeds previous expectations. This trend is likely to continue, given the ongoing geopolitical uncertainties and the need for diversified reserves.

Ask Aime: Why did Goldman Sachs raise its gold price forecast?

Additionally, the strong inflows into gold ETFs indicate that retail and institutional investors alike are seeking the safety and stability that gold offers. The ETFs, which allow investors to gain exposure to gold without physically holding the metal, have seen substantial capital inflows. This trend reflects a broader shift in investor sentiment towards safe-haven assets in the face of economic volatility and market uncertainties.

Goldman Sachs' analysts noted that the new forecast of $3,300 per ounce reflects an increase in gold purchases from November to January, with central banks buying approximately 190 tons of gold per month. They also mentioned that China is expected to continue accumulating gold rapidly over at least the next three years. The analysts highlighted that since the freezing of Russia's foreign exchange reserves in 2022, central banks, particularly those in emerging markets, have increased their gold purchases by about five times. This shift is seen as a structural change in foreign exchange reserve management, which is not expected to reverse in the short term.

Market investment demand has also been robust. The World Gold Council previously stated that overall gold investment demand is expected to remain strong due to investor concerns over global trade policies and geopolitical risks. In February, China's gold ETF inflows reached a historical high of approximately 14 billion yuan, with the total asset management scale rising to 89 billion yuan, setting a new record.

Goldman Sachs' analysts described the inflows into gold ETFs as "surprisingly high," suggesting that new demand for hedging could drive further expansion. They reiterated their view that the Federal Reserve will cut interest rates twice this year. The analysts noted that while ETF fund flows typically follow the Federal Reserve's policy rates, historical data shows that during prolonged periods of macroeconomic uncertainty, such as during the COVID-19 pandemic, they can overshoot. If hedging demand accelerates and drives ETF holdings to the 2020 pandemic peak, gold prices could reach $3,680 per ounce by the end of the year.

Goldman Sachs is not the only Wall Street firm bullish on gold. Last week, Citigroup Research also raised its forecast for gold futures prices over the next three months to $3,200 per ounce, up $200 from the previous estimate. If concerns about the worsening U.S. economy persist, gold prices could rise to $3,500 by the end of the year. "In our view, gold prices will reach $3,500 per ounce by the end of the year due to concerns about a hard landing/high inflation in the U.S., leading to a significant increase in hedging/investment demand, which will support gold prices," Citigroup stated.

On Wednesday, Bank of America released a new report stating that gold futures prices are expected to rise to $3,500 per ounce over the next two years. Currently, Bank of America forecasts that the average trading price of gold will be $3,063 per ounce in 2025 and $3,350 per ounce in 2026, up from previous estimates of $2,750 per ounce in 2025 and $2,625 per ounce in 2026. Bank of America noted that if gold investment demand increases by 10%, this new target could be achieved. The increase in gold investment demand comes from various sources, including continued purchases by central banks and strong retail investor interest in gold ETFs.

Bank of America emphasized that uncertainty surrounding U.S. trade policy will continue to support gold prices in the short term. In this context, Wall Street's bullish sentiment on gold is not isolated. UBS is bullish on gold at $3,200, and Macquarie is bullish at $3,500.