Goldman Sachs has upgraded its gold price forecast for the current year, citing a shift in the geopolitical landscape that will prompt an increase in demand among investors and central banks.
In light of the escalating conflict between Russia and Ukraine, the price of an ounce of gold was pushed north of $2,050 on Tuesday before slightly paring back gains. The sharp increase follows President Joe Biden’s decision to end all Russian oil and natural gas imports into the US effective immediately, and a subsequent warning to Americans about an impending increase in fuel prices.
As a result, the US bank now expects gold prices will hit $2,300 per ounce in the next three months, up from a previous projection of $1,950. Instead of a price target of $2,050 per ounce for the six-month horizon, Goldman expects gold will rise to $2,500 per ounce— and is maintaining that figure for the 12-month forecast, which was upgraded from a previous expectation of $2,150.
According to Goldman analysts Mikhail Sprogis and Sabine Schels, a number of factors are at play in support of the upgraded projections, namely being an increase in demand from consumers, investors, and central banks in response to uncertainty surrounding developing geopolitical tensions. “The last time we saw all major demand drivers accelerate simultaneously was in 2010-2011 when gold rallied by almost 70%,” they said in a note seen in Bloomberg.
The analysts anticipate that gold demand among central banks will reach a record-high in the second half of 2022, amid strengthened diversification efforts and threat of geopolitical uncertainty. Likewise, demand among consumers is also expected to rise in light of the ongoing economic recovery in Asia. The bank also pointed out that gold ETFs are gaining momentum for the first time since 2020, with the potential to continue accelerating since markets have yet to price in a slowdown in US economic growth— which will be imperative for curbing inflation.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
