Gold Outlook: Goldman Sachs raises yellow metal price forecast to $2,700 per ounce by year-end

Gold prices traded near record highs on Monday after surging led by demand for safe-haven assets amid ongoing conflict in the Middle East. Gold prices have risen 20% in the past two months, and analysts expect bullion prices to rise further.

Spot gold hit an all-time high of $2,431.29 last week, but U.S. gold futures were trading around $2,373.30 an ounce as of Monday.

Goldman Sachs believes the yellow metal is in a solid bull market and has raised its year-end gold price forecast to $2,700 an ounce from its previous target of $2,300.

Also read: Gold price today: Israel-Iran war continues to fuel gold prices even as the US dollar rate reaches a 34-year high against the Japanese yen

The brokerage said gold’s relative stability after last week’s better-than-expected U.S. consumer price index shows the gold bull market is not driven by the usual macro doubts. I think this is new evidence.

Gold has risen 20% in the past two months, even as the market has priced in tapering Fed interest rate cuts, strong growth trends and a record stock market.

“Traditional gold fair value ties the usual catalysts, namely real interest rates, growth expectations, and the dollar, to flows and prices. None of these traditional factors have influenced the speed of movement in gold prices so far this year. “However, this significant residual from traditional gold price models is neither a new feature nor a sign of overvaluation,” Goldman Sachs said in a report.

Also read: Will the conflict between Iran and Israel lead to higher gold and oil prices? Economist Mohamed A. El-Erian says…

Much of the rise in gold rates since mid-2022 has been driven by new incremental (physical) factors, including emerging market central bank accumulation and a significant acceleration in retail purchases in Asia. These factors are still well confirmed by current macro policies and geopolitics, it added.

Additionally, a Fed rate cut remains likely to be the catalyst to ease ETF headwinds in the second half of the year, and gold’s bullish bias remains evident given light-tail risks from the US election cycle and fiscal settings.

Impact of Iran-Israel tensions

The ongoing conflict between Iran and Israel has heightened tensions in the Middle East, and markets are concerned about further escalation of the situation. Given lingering geopolitical tensions, gold prices are expected to rise in the short term on the back of safe-haven demand for the yellow metal.

Gold prices traded with a positive bias on Monday as the Iran-Israel crisis accelerated flows into safe-haven assets. Analysts believe the overall trend in gold rates remains bullish.

Also read: What gold’s new strategy is telling equity investors

What can stop gold from rising?

On the contrary, according to Goldman Sachs, a potential factor that could at least help limit upside in gold prices, if not cause a bearish reversal, is a peaceful resolution to ongoing issues in the Middle East and Ukraine. , it may be a solution to various problems related to it. These include sanctions risks, the end of gold-buying programs by major central banks in emerging markets, calming growth concerns in China, and major adjustments from a hawkish Federal Reserve that could lead to higher interest rates.

“This would at least trigger a resumption of ETF sales and a spec liquidation in the West. However, the reality is that a combination of these developments is unlikely in the near term and this means that the bullish momentum in gold prices will continue.” This confirms our expectations,” Goldman Sachs said.

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Disclaimer: The views and recommendations above are those of individual analysts or brokerages and not of Mint. We recommend checking with a certified professional before making any investment decisions.