New forecast for gold prices

The sharp rise in gold prices over the past year has temporarily slowed the pace of central bank purchases. However, according to Goldman Sachs, a resurgence in central bank buying is expected once prices stabilize.

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In recent years, gold prices have risen, largely due to strong purchases by central banks. However, after hitting a record high of over 5,500 dollars per ounce last year, gold prices experienced a sharp correction. This price volatility has caused central banks to temporarily slow their purchases. Goldman Sachs analysts characterized this as a deferral of purchases until prices stabilize.

HIGH VOLATILITY AND PORTFOLIO DIVERSIFICATION DEMAND

In a note, Goldman Sachs analysts Lina Thomas and Daan Struyven stated that central banks will continue to buy gold as a hedge against geopolitical and financial risks, but will delay their purchases until prices stabilize. According to the analysts, the recent high price volatility stems from the private sector's demand for portfolio diversification. Transactions made through gold call options, in particular, are further sharpening price movements.

CENTRAL BANKS ARE ACTING CAUTIOUSLY

This high volatility is causing central banks in emerging markets to act cautiously. However, these banks maintain a positive long-term view on gold. According to World Gold Council data, central banks purchased a net total of approximately 1,000 tons of gold in 2023 and 2024. While this purchase volume is expected to fall to 900 tons in 2025, it is noted that purchases are being made at higher prices compared to previous years.

2026 YEAR-END FORECAST FOR GOLD PRICES

Earlier today, spot gold was trading at approximately 4,995 dollars per ounce, with prices having risen by about 16 percent since the beginning of the year. Goldman Sachs analysts stated that despite short-term fluctuations, the structural demand outlook for gold remains unchanged. The bank projects that central bank gold purchases will regain momentum as of 2025. Furthermore, it is estimated that potential interest rate cuts by the US Federal Reserve (Fed) could increase retail investor demand, potentially driving gold prices to 5,400 dollars per ounce by the end of 2026.

RISING RISKS MAY LIMIT GOLD PURCHASES

However, Goldman Sachs analysts noted that due to increasing fiscal risks in Western economies, demand for diversification could accelerate, and if this demand continues to come through options, gold price volatility will remain high, potentially keeping central bank purchases limited in the short term.

News Source: 12punto