In addition to rising geopolitical tensions - which have boosted gold prices due to safe-haven demand - two other factors will help boost gold prices further, according to Goldman Sachs.
Those factors are falling interest rates and seemingly insatiable demand for the precious metal from central banks in emerging market countries.
Goldman Sachs has raised its gold price forecast to $2,900 an ounce from $2,700, up about 9% from current levels.
This year alone, gold prices have increased by 29%.
"We reiterate our long-term gold buy recommendation due to i) the gradual boost from lower global interest rates, ii) structurally higher central bank demand and iii) gold's hedging benefits against geopolitical, financial and recessionary risks," said Goldman Sachs analyst Lina Thomas.
Goldman Sachs highlights that central banks of emerging market countries like China are the reason for the sharp rise in gold prices from 2022.
The bank estimates that institutional demand for the precious metal on the London OTC market remained strong through July, with year-to-date gold purchases averaging 730 tonnes annually.
This figure represents about 15% of estimated global annual gold production.
“Moderate but still significant central bank buying in the London OTC market drives about two-thirds of the expected rise in gold prices to $2,900 by early 2025,” Thomas said.
In addition to lower interest rates and solid demand from central banks, gold is the top choice for investors given the many risks in the market today: the upcoming US presidential election, the risk of war between Israel and Iran, and economic uncertainty due to mass strikes at US East Coast ports.
