Key highlights:
- Goldman Sachs has cut its near-term gold price target from $5,400 to $4,900.
- The Wall Street giant says falling chances of an interest rate cut will affect gold prices.
- However, countries are still buying the precious metal with retail traders waiting on the sidelines.
Goldman Sachs has revised its end-of-year target for the
Historically, gold struggles when the Federal Reserve turns hawkish because higher interest rates increase the appeal of yield-bearing assets like bonds. Since gold pays no yield, the opportunity cost of holding the asset rises when interest rates climb higher.
In a bear case scenario, Goldman Sachs’ analysts theorized that a hike in interest rates could see the precious metal trade at $4,400 by the end of the year. Meanwhile, gold is heading for its third consecutive weekly loss, with the asset trading below its 200-day moving average since the start of June.
A ray of light for gold
Despite the Fed’s hawkish stance dampening price outlook, Goldman Sachs disclosed that there is still a silver lining in the dark cloud for gold. Analysts pointed to sustained central bank demand for the precious metal as factors capable of propping up short-term price performance.
However, current central bank demand is lower than its peak of 67 tonnes per month but still higher than the 17 tonnes a month before 2023. While central banks and institutions have the largest appetite for gold, Goldman Sachs hinted that rising geopolitical tensions will trigger retail investors to scoop up the precious metal in the near future. The report reads:
“Gold’s share in private portfolios remains small, and the Iran episode – together with broader geopolitical developments – may eventually accelerate diversification into gold, including by weighing on perceptions of Western fiscal sustainability.”
Last year, gold saw its strongest rally, setting multiple all-time highs in a meteoric run, with Goldman Sachs correctly predicting the price surge. The Wall Street giant remains one of gold’s most bullish advocates despite its foray into digital assets.
Source:: Goldman Sachs Slashes End-of-Year Gold Target by $500 Due to Hawkish Fed Stance