Goldman raises gold forecast, reiterates its bullish view on commodities
Goldman Sachs on Thursday raised its gold forecast, describing it as the best hedge against financial risks, and reiterated its bullish view on commodities as a banking crisis has yet to spill over into physical markets.
It raised its 12-month gold price target to $2,050 per troy ounce from $1,950, joining other banks such as Citi, ANZ and Commerzbank who have already raised their forecasts.
“We believe the market will be well supported, not only by ETF (exchange-traded fund) inflows as Fed funds rates have peaked, but by a stronger “Wealth Effect” from the East as the USD depreciates into year-end on yield compression and EM GDP grows strongly on China’s reopening effects,” the bank said in a note.
Gold price broke above $2,000 on Monday on safe-haven demand triggered by the banking crisis before easing after the bailout of Credit Suisse.
Prices of the zero interest rate asset jumped as much as two percent on Wednesday after the US central bank indicated that an end to rate hikes was on the horizon.
Gold would slowly grind higher on central bank buying and geopolitical concerns, despite short-term risks such as a likely decline in Chinese physical buying, but a break above $2,100 would require the Fed to initiate actual rate cuts, which was not its view, Goldman said.
Goldman also said it was confident in its “super cycle thesis”, where supply constraints became pronounced later this year, leading to another price increase, adding that it favored metals over oil in the short term.
“Chinese demand continues to rise across the commodity complex, with oil demand already topping 16 million barrels per day,” the bank said, predicting that Brent will reach $97 per barrel in the second quarter of 2024.
The recent pullback in oil was due to financial risks rather than fundamental supply-demand factors and oil was currently “oversold,” the US investment bank said.
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