Central banks in emerging countries continue to buy large amounts of gold, pushing the metal’s price up even after successive historical record highs, while the decline in American interest rates reinforces the trend of appreciation.
Goldman Sachs today raised its estimate for the price at the beginning of 2025 from US$2,700 to US$2,900 per troy ounce (1 troy ounce = 31.10 grams).
The revision was due to two factors.
First, the downward cycle of interest rates in advanced countries and China will be faster than expected, and the current price does not reflect the expected appreciation of gold-backed ETFs.
Second (and main) factor: the strong purchases by emerging countries, with China’s acquisitions in the over-the-counter physical market in London standing out.
Although the numbers from this market are published quarterly, Goldman says its proprietary model indicates that demand has remained robust in recent months.
The price of gold has already risen by about 30% this year and nearly 50% since the beginning of 2002.
Last week, the price hit a record high of US$2,695 per troy ounce – a value close to Goldman’s previous estimate.
“We reiterate our recommendation to buy the metal thanks to: 1) the gradual encouragement of lower interest rates; 2) increased structural demand from central banks; and 3) gold is a hedge against geopolitical, financial, and recession risks,” wrote Goldman’s team.
According to the bank, two-thirds of the expected increase is due to central bank purchases.
Goldman’s model for estimating physical purchases volumes in London – the main international hub for the metal – takes into account data on bar exports made by the United Kingdom.
UBS cited similar reasons for also raising its estimates last week. Now the bank expects the ounce to reach US$2,750 by the end of the year and US$2,900 in the third quarter of 2025.
Historically, gold rises around 10% in the six months following the first cut in a Fed monetary easing cycle.
Since gold is quoted in dollars, the decline in US interest rates and the trend of weakening the American currency contribute to the appreciation of the metal.
On the other hand, Bank of America said its estimates for the year were beaten. “We do not recommend continuing to chase gold now, due to stretched levels.”
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Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
