Goldman Sachs Sees Optimistic Outlook for Gold Prices

Goldman Sachs (GS) has indicated that if the U.S. Federal Reserve (Fed) does not proceed with further interest rate cuts, it may revise down its gold price target of $3,000 by the end of 2025. The bank forecasts that if the Fed only reduces rates by another 25 basis points, the gold price could rise to $2,890 by the end of next year. However, bank analysts argue that the strong dollar is a common narrative and will not hinder gold from reaching its $3,000 target. Goldman expects an additional 125 basis points cut to result in a 7% increase in gold prices. In its note, the bank emphasizes significant considerations on how investors will position themselves in the gold market, which is caught between the Fed's easing policies and a strong dollar.

Wells Fargo (WFC) anticipates that demand from emerging market central banks will play a crucial role in driving gold prices up in 2025. While a strong U.S. economy supports the dollar, the end of the Fed's easing process may challenge gold investment demand. Nonetheless, Wells Fargo believes gold could reach new heights despite market dynamics. Commodity Strategist John LaForge advises investors to adopt a broad commodity portfolio that includes oil and gold. He predicts that gold will be priced between $2,800 and $2,900 by the end of 2025, while West Texas Intermediate (WTI) crude oil prices are expected to fluctuate between $85 and $95 per barrel during the same period.

BlackRock (BLK) anticipates that even "modest" interest rate cuts by the Fed could drive investors away from cash towards stocks and bonds. BlackRock's CFO, Martin Small, argues that such cuts could significantly awaken risk appetite among investors. On the other hand, current data shows that investors still prefer to remain in cash as a safe haven. According to recent data, assets in U.S. money market funds have shown a significant increase. Small notes that political and economic uncertainties continue to support investors' tendency to stay in cash.