Goldman Sachs on Thursday raised its gold price forecasts, 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 hiked its 12-month gold price target to $2 050 an ounce from $1 950, joining others such as Citi, ANZ and Commerzbank in raising forecasts.
“We believe the market will be well supported not only by ETF (exchange traded fund) inflows once Fed fund 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 reopening effects,” the bank said in a note.
Gold broke above $2 000 on Monday on safe-haven demand triggered by the banking crisis before easing following the rescue of Credit Suisse.
The zero-yield asset’s prices jumped as much as 2% on Wednesday after the US Federal Reserve indicated an end to rate hikes was on the horizon.
Gold would slowly grind higher on central bank buying and geopolitical concerns, despite shorter-term risks such as a likely slowdown 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 commodity ‘supercycle thesis’, with supply constraints becoming pronounced later this year, prompting another rise in prices, adding it favored metals over oil near term.
“Chinese demand continues to surge across the commodity complex, with oil demand already topping 16-million barrels-per-day,” the bank said, forecasting Brent to reach $97 a 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”, it said.