Spot gold rose 1% to $2,661.63 an ounce at 17:40 GMT on October 1 (0:40 on October 2 Vietnam time), after hitting an all-time high of $2,685.42 on September 26. US gold futures rose 0.9% to $2,690.3.
Iran fired a barrage of missiles at Israel on October 1 in retaliation for Israel's campaign against Tehran's Hezbollah allies in Lebanon, Reuters reported.
“If there are serious casualties in Israel, then we could have a full-blown war in the Middle East, which is what I think traders are worried about right now, which could drive even more safe-haven demand for gold,” said Jim Wyckoff, senior market analyst at Kitco Metals.
Gold is used as a safe investment during times of political and financial instability.
“This is instinctive safe-haven buying,” said Tai Wong, an independent metals trader in New York.
On October 1, many banks raised their gold price forecasts. Goldman Sachs raised its gold price forecast for early 2025 to $2,900 an ounce from $2,700 previously, citing two main reasons.
First, Goldman Sachs predicts a faster decline in short-term interest rates in Western countries and China, adding that the gold market “has yet to fully price in a rise in interest rates for physical gold-backed Western ETF holdings, which is likely to be gradual.”
Second, ongoing strong buying by emerging market (EM) central banks in London’s over-the-counter (OTC) market is expected to continue to fuel the gold rally starting in 2022. Strategists believe that “these purchases will remain structurally high.”
Goldman’s current forecasting tool shows that demand for gold from central banks and institutions in the London OTC market remains strong, with purchases averaging 730 tonnes a year through July, accounting for about 15% of estimated annual global production.
China has been a significant contributor to this demand, with Goldman Sachs’ current forecast matching that of the World Gold Council (WGC). However, Goldman Sachs’ forecast has advantages such as monthly updates, country-level transparency, and the use of customs data to make its estimates.
Goldman Sachs also reiterated its long-term gold recommendation, explaining that the reasons for gold's price increase include lower global interest rates, structurally higher demand from central banks, and gold's traditional role as a hedge against geopolitical, financial, and recession risks.
Gold prices remained slightly below their all-time highs hit on October 1 after US Federal Reserve Chairman Jerome Powell downplayed the likelihood of a significant interest rate cut this year, at just 0.25%.
Meanwhile, Bank of America announced that it still maintains its 2025 gold price forecast at $2,750.
The average gold price forecast by investment banks tracking the precious metals market is between $2,800 and $3,000 an ounce by 2025.
