Gold prices outlook: Goldman Sachs raises forecast from $2300 to $2700 per ounce

Gold prices have seen a continued rally for the past two months since February and are not showing any sign of cooling off soon due to the current global scenario. In its forecasts for the precious metals in a note, Goldman Sachs predicted that the yellow metal will likely rise to $2,700 per ounce this year.

Goldman Sachs in a note to its clients this week has noted that gold's relative stability in the aftermath of this week's stronger-than-expected US CPI print was yet another demonstration that the metal's bull market is not being driven by the usual macro suspects Indeed, despite the market pricing progressively fewer Fed cuts, stronger growth trends and record equity markets, gold has rallied 20 percent over the past two months

"The traditional fair value of gold would connect the usual catalysts-real rates, growth expectations and the dollar-to flows and the price. None of those traditional factors adequately explain the velocity and scale of the gold price move so far this year. Yet that substantial residual from the traditional gold price model is neither a new feature nor a sign of overvaluation. Indeed, the majority of the gold upside since mid-2022 has been driven by new incremental (physical) factors, not least a significant acceleration in EM Central Bank accumulation as well as Asian retail buying," the note added.

The note further stated that moreover, with Fed cuts still a likely catalyst to soften the ETF headwind later in the year, and right tail risk from the US election cycle and fiscal setting, goid's bullish skew remains clear.

From the rebased price level, and with the firm seeing positive price factors still playing out ahead, they upgraded their price forecast to $2,700 per ounce by the year-end compared to the previous expectation of $2,300 per ounce.

"The positive factors for gold outweigh the negative. The heightened tensions in Middle East is the main driver for gold's recent surge," said Chris Gaffney, president of world markets at EverBank to news agency Reuters.

Meanwhile, gold prices rose above $2,400 per ounce to an all-time high on Friday, heading for their fourth week of gains, as growing tensions in the Middle East prompted investors to seek refuge in the safe-haven assets.*With Agency Inputs