from ZeroHedge:
Despite having rallied 29% YTD and 47% since 2022, gold continues to set all-time highs, reaching $2,685/toz on Thursday.
Goldman Sachs Precious Metals analysts have raised their gold price forecast from $2,700/toz to $2,900/toz for early 2025 for two reasons.
- First, our economists now look for faster declines in short-term interest rates in the West and China, and we recently showed that the gold market doesn’t fully price in the rates boost to Western ETF holdings backed by physical gold yet, which tends to be gradual.
- Second, our new nowcast shows that EM central bank purchases on the London over-the-counter (OTC) market continue to fundamentally drive the rally since 2022, and we believe that these structural purchases will remain elevated.
TRUTH LIVES on at https://sgtreport.tv/
Under Goldman’s forecast, moderating but still significant central bank purchases on the London OTC market drive about 2/3 of the expected rise of the gold price to $2,900/toz in early 2025.
The gradual rise in ETF flows following the Fed rate-cuts our economists expect drives the remaining 1/3 of price upside.
This forecast also relies on our rule of thumb that 100 tonnes of physical demand lifts gold prices by at least 2.4%, the lower bound of our regression estimate.
Following Goldman’s analysis of structurally higher demand from central banks, they developed a nowcast of central bank demand in the London OTC market, where most of these transactions take place.
Central Banks Continue to Drive the Rally Since 2022
Top of mind for investors is “Who is the ‘secret’ gold buyer?“, as gold has rallied 47% since 2022, despite rising rates which typically predict lower prices.
While the gold-price-to-rates relationship remains intact in changes, the ‘secret’ buyer has elevated prices and reset the relationship in absolute levels.
