Gold remains a strong investment choice, according to Goldman Sachs analysts. Despite a slight dip from its all-time high last month, gold futures are trading above $2,515 per ounce. The metal has risen nearly 22% year to date, making it the second-best-performing asset globally, after cryptocurrencies.
Gold as a Preferred Investment
In a recent research note, Goldman Sachs highlighted gold as a top investment pick. The analysts emphasize that gold is an effective hedge against geopolitical and financial risks, bolstered by anticipated Federal Reserve rate cuts and continued purchases by emerging market central banks.
Goldman Sachs has set a 2025 price target of $2,700 per ounce for gold and continues to recommend a long position in the metal.
Central Bank Purchases Drive Demand
Record gold purchases by central banks in early 2024 have significantly contributed to gold’s price increase. Bank of America analysts suggest that gold has surpassed the euro to become the largest reserve asset after the US dollar.
Geopolitical Risks and Federal Reserve Signals
Ongoing geopolitical tensions, such as the Israel-Hamas conflict and the Russia-Ukraine war, have supported gold prices. Additionally, the Federal Reserve’s potential rate cut in September and signs of a slowing labor market have also influenced gold’s value.
Tom Bruni, head of market research at Stocktwits, noted that gold is increasingly viewed as a hedge against uncertainty.
Increased Investment in Gold ETFs
Physically backed gold ETFs have seen inflows for three consecutive months, with Western investors, particularly in North America, driving this trend. According to the latest data from the World Gold Council, North American investments in gold ETFs outpaced those in Europe and Asia in July.
September’s Historical Trends and Future Outlook
Despite its strong performance, gold has historically faced declines every September since 2017. Analysts are closely watching the upcoming Federal Reserve meeting and the crucial jobs report on Friday for potential impacts on gold prices.
JPMorgan analysts have noted that gold prices are expected to remain around $2,500 per ounce, with attention focused on the anticipated Fed rate cut later this month. As of early Tuesday, traders are pricing in a 31% chance of a 50 basis point rate cut, as opposed to a 25 basis point reduction, according to the CME FedWatch Tool.
