Goldman Sachs Just Revised Their Gold Price Forecast, No Longer Seeing $3,000 Target By Year-End
AInvestMonday, Jan 6, 2025 10:14 am ET
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Following Trump's election victory, market concerns about the outlook for U.S. inflation have been rekindled. Against this backdrop, gold has taken a breather from its rise in the past two months, and Wall Street giants who were previously very optimistic about the prospects for gold prices have also begun to change their stance.

Goldman Sachs Group analysts recently changed their tune, no longer expecting the gold price to reach their previously anticipated $3,000 per ounce by the end of this year, as they anticipate the Federal Reserve will reduce the magnitude of rate cuts in 2025. They have lowered their year-end target price for gold to $2,910 per ounce and expect the Fed to possibly only cut rates by 75 basis points during the year.

Goldman Sachs Changes Stance: Gold May Not Hit $3,000 by Year-End

Supported by the Fed's rate cuts, rising market demand for safe-haven assets, and continued purchases by central banks around the world, gold surged 27% in 2024, hitting a historical high. However, with Trump's election victory, the dollar was boosted, and gold's rise has been stuck since early November 2024.

The market widely worries that under Trump's tax cuts and increased tariff policies, U.S. prices will face greater upward pressure. Recently, several Federal Reserve officials have also begun to emphasize the need for a more cautious stance on rate cuts in 2025 amidst renewed U.S. inflation concerns, further pressuring gold prices.

As the momentum for gold's rise weakens, Goldman Sachs analysts such as Lina Thomas and Daan Struyven have also changed their previous expectations.

They now believe that the pace of the Fed's monetary easing in 2025 is expected to slow, which will suppress market demand for gold ETFs, leading to gold prices only reaching $2,910 per ounce by the end of 2025, not the $3,000 target they previously anticipated.

They also expect that the gold price will not reach the $3,000 milestone until mid-2026.

Central Bank Purchases Remain a Sustaining Factor

Goldman Sachs analysts also wrote in a report that due to the alleviation of political uncertainty after the U.S. election, gold ETF capital flows in December 2024 were weaker than expected, which also led to a lower starting point for gold pricing in 2025.

The analysts said two opposing forces—the decline in speculative demand and the increase in structural central bank buying—significantly offset each other, keeping gold prices within a range in the past few months.

They added that central banks' continued purchases of gold will remain a key driver of long-term gold prices. Looking ahead, Goldman Sachs expects the average monthly central bank gold purchases to reach 38 tons by mid-2026.

Goldman Sachs economists currently expect the Fed to cut rates by only 75 basis points in 2025, a lower reduction than the 100 basis points they previously forecasted.

However, this forecast is also more dovish than the current market consensus, as Goldman Sachs believes that the underlying U.S. inflation rate still tends to decline. According to the CME FedWatch Tool, by December 2025, the market considers it most likely (34.9% chance) that the Fed will only cut rates by 25 basis points, and there is also a 30.7% chance of only a 50 basis point cut.

Additionally, some market participants worry that during Trump's second term, policy changes by the administration could lead to an increase rather than a decrease in Fed rates, but Goldman Sachs is skeptical of this speculation.

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