According to Goldman Sachs, investors should “go for gold” as the precious metal stands out as the best commodity to hedge against geopolitical and financial risks. In a research note on Monday, Goldman’s team of commodities analysts told clients that gold should rise to $2,700 an ounce by early 2025 as the Federal Reserve prepares to start cutting interest rates in September and Western capital returns to the precious metal. Meanwhile, emerging market central banks continue to buy gold, with purchases tripling since mid-2022 on concerns over U.S. financial sanctions and mounting sovereign debt, the analysts wrote. Goldman is taking a more selective approach to commodity investments as weak Chinese demand weighs on oil and copper prices. The investment bank cut its Brent crude oil outlook by $5 to $70-$85 a barrel and postponed its copper price target of $12,000 a ton to beyond 2025. “In this mildly cyclical environment, gold stands out as the commodity with the most confidence in a near-term upside,” Goldman’s research team, led by Samantha Dart, told clients. Gold futures have surged nearly 22% this year and are trading above $2,500 an ounce. Separately, Bank of America sees gold reaching its target of $3,000 an ounce within the next 12 to 18 months, analysts said in a report published on Tuesday. Capital flows are not currently supporting this price, but the bank said the precious metal could rise to this target price due to increased non-commercial demand sparked by the Fed’s interest rate cut. @GC.1 Gold futures for 2024 are at their highest since the start of the year. Copper is expected to average $10,100 a ton in 2025, well above this year’s average of $9,231, but well below the $15,000 Goldman expected for next year. A delayed rise in copper prices would likely be a drag on aluminum demand, according to Goldman. The Wall Street firm is also bearish on nickel and has suspended zinc trading. Weakness in China’s real estate sector has limited upside room for steel and poses a challenge for iron ore prices. “Because China accounted for two-thirds of commodity demand growth pre-pandemic, we believe it will be difficult to run up significant deficits in these markets without strong Chinese demand,” Goldman analysts wrote. Goldman still maintains its long-term view that metals important to the energy transition away from fossil fuels, such as copper, will eventually reach scarcity prices due to rising demand, falling investment and declining inventories.
Goldman recommends gold; likes metal amid geopolitical risk, rate cuts
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