Goldman Sachs Maintains Bullish Outlook on Gold Despite Strengthening Dollar

Goldman Sachs reiterated its bullish outlook on gold prices, arguing against the notion that gold will not rise to $3,000 per ounce by the end of 2025 in a world where the dollar is strengthening.

Goldman stated, "Less Fed rate cuts represent the primary downside risk to our $3,000 gold price forecast for the end of 2025, while a stronger dollar is not a fundamental risk factor."

The firm expects an additional 125 basis points of Fed cuts to lead to a 7% increase in gold prices. However, the bank forecasts that if the Fed only cuts rates by another 25 basis points, the gold price will rise to just $2,890 per ounce by the end of 2025.

Gold tends to gain value on the expectation of lower interest rates, as lower rates reduce the opportunity cost of holding a non-yielding asset.

Goldman added, "We do not agree with the view that the strengthening dollar will halt central banks' gold purchases, which constitutes 9% of the increase in gold prices in our base case by the end of 2025, as central banks are purchasing gold internationally with dollar reserves. We expect the anticipated depreciation of the Chinese yuan and broader policy easing to have a roughly neutral net effect on China's retail gold demand."