Goldman Sachs Group states that central banks are expected to increase their gold purchases, aiding in a recovery of gold prices before the end of the year.
Analysts Lina Thomas and Daan Struyven at Goldman Sachs noted in a report on May 15th that central bank gold buying is projected to rebound to an average of 60 tons per month by 2026. According to a revised cumulative estimation framework, the 12-month moving average for purchases in March was 50 tons, up from a previous 29 tons.
The analysts cited an internal survey, indicating that central banks have "strong fundamental demand for gold, and recent geopolitical developments may further reinforce their diversification strategies over time."
Since the outbreak of the Middle East conflict, gold has faced challenges as rising energy costs have intensified global inflationary pressures, reducing the likelihood of central banks easing monetary policy. With no end in sight to the conflict, a sell-off in global bond markets has put pressure on non-yielding assets like gold.
Goldman Sachs' assessment of official sector activity follows an optimistic evaluation from the World Gold Council, which estimated first-quarter central bank purchases at 244 tons, higher than the 208 tons in the previous three months.
Spot gold traded near $4,534 per ounce on Monday, compared to a record high slightly below $5,600 set in late January. Goldman Sachs maintains a bullish target, expecting gold prices to climb to $5,400 per ounce by the end of this year. Previously, institutions such as UBS and ANZ have also issued similar bullish forecasts.
UBS projects gold prices will reach $5,600 per ounce by year-end, with silver prices hitting $100 per ounce, while ANZ suggests gold could rise to $6,000 per ounce due to an energy crisis expected to curb economic growth.
However, Goldman Sachs remains cautious about the short-term outlook. The bank's analysts noted that gold serves as "a natural source of liquidity for private investors facing funding needs—for instance, if equity markets sell off amid rising interest rates and weakening growth expectations."
Goldman Sachs' method for estimating central bank purchases is partly based on assumptions about fund flows in UK trade data. The analysts stated that updates to this methodology were made because the data may "no longer fully reflect" relevant changes.
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