A few days ago, an analyst from Goldman Sachs sent a note analyzing the possible trend of the gold price in 2025.
The suggestion given in that note is explicit: “Go for Gold”.
It’s Official
Goldman Sachs expects central banks will keep fleeing towards gold due to ‘fear for financial sanctions and US sovereign debt’ pic.twitter.com/C0ngVVNIlK
— Willem Middelkoop (@wmiddelkoop) September 3, 2024
The trend of the price of gold over time
The note from the Goldman Sachs analyst in fact suggests to investors to also bet on gold for the next year, as the bull run of its price might not be over yet.
The year 2024 opened with gold at around $2,060 per ounce on the financial markets, and it was already a very high price, given that it was in line with the historical highs at that time.
However, it was also in line with the highs of 2020, always recorded around the 2,060$ mark, although during the bear-market of 2022 it had dropped to as low as 1,600$.
But after a -22% from the highs, a sensational rebound began that brought it back close to the highs in just over a year, and then even beyond.
In fact, in March of this year, with momentum, it first surpassed $2,100 and then also $2,180, setting new highs.
After a brief pause, it resumed growing at the end of March, even breaking through the 2,300$ barrier.
In May it then also surpassed $2,400, and in July it started a new rally that took it above $2,500.
The prospects of gold in the long term
Taking as a reference only the highs of 2020, and the lows of 2022, the current price of about $2,520 is +23% from the former, and even +54% from the latter.
A +54% in less than two years for the price of gold is really something unusual, even if the +23% in four years is actually much more normal.
Note that ten years ago an ounce of gold on the financial markets was worth less than $1,400, even though in 2011 it had briefly surpassed $1,900.
In particular, the +31% between the highs of this year and those of 13 years ago clearly shows that the price of gold does not grow with speculative bubbles with percentages, sensational, but little by little, gradually over time, even if sometimes in the medium/short term it can mark small rallies.
The forecast of Goldman Sachs on the price of gold in 2025
The Goldman Sachs analyst in their note points out that the price of gold has increased by almost 22% since the beginning of the year, making it the second-best performing asset class in 2024 after some criptovalute.
The same analyst also states that Goldman Sachs’ preferred long in the short term at this moment is precisely gold, because it is their preferred hedge against geopolitical and financial risks.
Furthermore, it could receive additional support from the imminent Fed rate cuts and ongoing purchases by central banks.
The analyst states that the target for Goldman Sachs is a price of $2,700 per ounce by 2025.
It would still only be an +8% from the current level, and although it is still a lot after a +22% gained so far in the course of just 2024, compared to the peak of thirteen years ago it would ultimately be only a +42% more in a decade.
The motivations behind Goldman Sachs’ analysis: gold price at $2,700 in 2025
The note from Goldman Sachs points out that gold purchases by central banks reached a record in the first quarter of 2024, and have been one of the main drivers of the price increase. Some analysts estimate that it has also surpassed the euro, becoming the second largest reserve in the world, second only to the US dollar.
Moreover, gold serves as a hedge against geopolitical risks as well, such as the war between Israel and Hamas and the conflict between Russia and Ukraine.
The head of market research at Stocktwits, Tom Bruni, stated that we are witnessing the use of gold as a measure of protection against uncertainty.
Investments in gold with physical guarantee also recorded strong inflows, for the third consecutive month, particularly thanks to investors from North America.
A turning point could arrive relatively soon, because the Fed in less than two weeks will meet to decide whether to cut rates or not. Practically everyone predicts that they will cut them, perhaps even by 50 basis points.
All this indeed suggests that the gold rally could also continue, although it cannot be ruled out that in the short term it may correct slightly.
