Goldman Sachs hikes year-end gold price outlook to $2,700/oz

Goldman Sachs on Friday hiked its year-end gold price forecast to $2,700 per ounce from $2,300, saying the metal's bull market is not being driven by the usual macro factors.

"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, gold's bullish skew remains clear," Goldman Sachs analysts said in a note.

Gold prices rose above $2,400 per ounce to an all-time high on Friday, driven by persistent safe-haven-demand and central bank purchases amid growing geopolitical tensions.

Gold prices also continue to find support from physical demand from Chinese households, with the buying appetite not tarnished by gold's record rally.

"Asian retail demand, led by China, has been driven by fear over economic stability and currency depreciation, particularly tied in China to the property sector," Goldman Sachs said.

"US fiscal sustainability concerns, combined with incremental risks from the election cycle, can be seen as another feature of brewing structural fear with a positive influence on gold buying."

Goldman Sachs also said that none of traditional factors like real rates, growth expectations, the dollar and exchange-traded fund (ETF) flows adequately explain the velocity and scale of the gold price move so far this year.

Gold prices have risen more than $300, or nearly 15%, so far in 2024.

Goldman said peaceful resolutions in the Middle East and Ukraine, a settling in China growth concerns and a significant hawkish Fed adjustment leading to interest rate hikes would be needed to restrain upside in gold.

"The reality though is that the near-term potential for a combination of these developments is low, which underpins our expectation for continued bullish momentum in the gold price," Goldman said.