Goldman Sachs raises year-end gold forecast to $3,700 on strong demand

Goldman Sachs has increased its year-end gold forecast to $3,700 per troy ounce (toz), citing stronger-than-expected central bank demand and heightened recession risks impacting ETF inflows.

The investment bank, whose previous year-end forecast was $3,300, said it expected central bank demand to average 80 tonnes per month, up from its previous assumption of 70 tonnes and well above the pre-2022 baseline of 17 tonnes per month.

The bank also noted a surge in gold ETF inflows, driven by fears of a recession, with its economists assigning a 45 per cent probability to a US recession in the next 12 months.

 

Make smarter market moves with The Smart Investor. Daily insights on buzzing stocks and actionable information to guide your investment decisions delivered to your inbox.

Subscribe

Spot gold has continued its rally from the last year, hitting multiple record highs and gaining more than 23 per cent so far this year. Bullion breached $3,200 an ounce for the first time on Friday. [GOL/]

The bank's analysis also said that in the medium-term, the risks to their upgraded forecast remain skewed to the upside. If central bank buying averages 100 tonnes/month, Goldman estimates that gold could reach $3,810/toz by end-2025. On the ETF side, if a recession occurs, ETF inflows could revert back to pandemic levels, supporting prices towards $3,880/toz by year-end.

However, if economic growth outperforms expectations due to reduced policy uncertainty, ETF flows would likely revert back to their rates-based prediction, with year-end prices closer to $3,550/toz, Goldman said.