Major Banks’ Gold Price Predictions for 2024 and 2025

The price of gold has been on a remarkable ascent, breaking record after record. Currently trading at $2,640 per ounce, it has gained $110 over its previous high from five weeks ago. This year has shaped up to be the best for gold in the past 14 years.

In light of these trends, major financial institutions, including Goldman Sachs, Commerzbank, and UBS, have updated their predictions for gold prices. This article dives into these forecasts, examining the driving forces behind them and what they mean for investors.

Goldman Sachs Forecast: $2,900/oz by Early 2025

Goldman Sachs, a global leader in investment banking, has recently increased its gold price forecast to $2,900 per ounce by early 2025.

This $200 upward revision – from $2,700 to $2,900 – comes amid several critical factors supporting gold’s price trajectory. The bank has maintained a bullish long-term outlook on gold, with a buy recommendation driven by three key reasons:

1. Central Banks’ Monetary Injections: The ongoing injection of capital from central banks worldwide will likely sustain gold demand as part of a broad monetary strategy, even without explicit announcements. This capital flow adds liquidity to the global economy, driving demand for safe-haven assets like gold.
2. Imminent FRS Rate Cuts: The anticipated rate cuts by the Federal Reserve (FRS) are expected to re-attract Western capital to the gold market. Over the past two years, this capital was largely inactive amid rising interest rates, which dampened demand for non-yielding assets like gold.
3. Hedge Against Geopolitical and Economic Risks: Gold’s resilience as a hedge is amplified in an era of heightened geopolitical tension and economic uncertainty. The bank points to risks like tariff disputes, central bank policy dependencies, and concerns over sovereign debt as factors that bolster gold’s role as a risk-averse investment.

Commerzbank’s Outlook: $2,600/oz by Year-End 2024

Commerzbank, a prominent German financial institution, has set a near-term target of $2,600 per ounce by the end of 2024. Recognising gold’s role as a “safe haven” asset during periods of economic uncertainty, the bank’s analysts forecast continued price strength despite potential price resistance as it approaches $2,600.

Their revised forecast is rooted in the expectation that the Federal Reserve will maintain its interest rate stance until 2026

Short-term support for gold prices, according to Commerzbank, is closely tied to the FRS’s outlook on interest rates. This cautious interest rate forecast means that, in the bank’s view, the risk of rate hikes in the near term is low, paving the way for continued gold price appreciation.

UBS Analysis: Cautiously Optimistic for Gold’s Future

The Swiss banking giant UBS offers a more measured take on the recent surge in gold prices. UBS analysts describe the recent 5% rise in September as “unusually strong,” which diverges from gold’s historical behavior over the past decade.

While UBS acknowledges the growing positivity surrounding gold among investors, it suggests that the increase in investor sentiment may not be fully mirrored in actual market positions yet.

Despite UBS’s cautious optimism, the recent surge hints at the potential for sustained strength in gold prices, especially if economic uncertainties persist. Their stance is particularly relevant for investors who may be considering entering the market amidst these positive but cautious signals.

Tavex Insights: Investor Behaviour and Market Resilience

Tavex believes that a price correction could be beneficial, allowing longer term investors to enter the market at more favourable levels. However, if US economic growth surges, prompting the Federal Reserve to adjust its interest rate strategy, such a correction may materialise but likely won’t be drastic.

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The 2024 gold market, with its rapid price increases, marks the strongest year for the precious metal in over a decade

While a short-term pullback could offer buying opportunities, many experts, including Tavex, suggest that gold’s long-term outlook remains positive.

Factors Supporting the Bullish Gold Outlook

Several macroeconomic and geopolitical factors continue to support a positive outlook for gold prices in the coming years, with it continuing to reach record highs:

• Global Interest Rates: Declining global interest rates reduce the opportunity cost of holding non-yielding assets like gold, thus enhancing gold’s attractiveness to investors.
• Central Bank Demand: Central banks worldwide continue to build their gold reserves, lending support to long-term demand.
• Economic and Geopolitical Risks: Gold’s role as a safe-haven asset makes it appealing during times of geopolitical tension, inflationary pressures, and concerns over sovereign debt.

Key Takeaways: What Do These Predictions Mean?

With Goldman Sachs predicting $2,900 by early 2025 and Commerzbank expecting $2,600 by the end of 2024, there is a strong consensus among major banks that gold prices will continue to rise.

Investors considering adding gold to their portfolios should weigh these predictions and the current favourable market conditions. They are recognising that gold may offer a prudent hedge against economic uncertainties with its continuing market price going up. However, those looking for optimal entry points might consider waiting for potential short-term corrections, as suggested by Tavex.

In summary, gold’s impressive rally this year signals a potential for continued gains, driven by central bank demand, lower interest rates (interest rate cuts), and safe-haven appeal.

For investors, this could be a prime moment to diversify portfolios and invest in gold, securing a hedge against both geopolitical risks and long-term economic uncertainties.