Gold Bulls Signal: Central Banks Aim to Boost Reserves with More Gold, Goldman Sachs Says

Goldman Sachs Group indicates that central banks are expected to increase their gold purchases, which could help support a recovery in gold prices by the end of the year.

In a report dated May 15, Goldman Sachs analysts Lina Thomas and Daan Struyven forecast that purchases could average 60 tonnes per month by 2026. According to a revised cumulative estimation framework, the 12-month moving average of purchases in March was 50 tonnes, up from a previous 29 tonnes.

The analysts cited internal surveys suggesting that central banks have "strong underlying interest in gold, and recent geopolitical developments may further reinforce diversification allocations over time."

Gold has underperformed since the outbreak of the Middle East conflict, as rising energy costs have increased global inflationary pressures, making it less likely for central banks to ease monetary policy.

With no signs of the conflict ending, a sell-off in global bond markets has put pressure on non-yielding gold.

Goldman Sachs' assessment of official sector activity follows an optimistic outlook from the World Gold Council, which estimated that central banks bought 244 tonnes of gold in the first quarter, up from 208 tonnes in the previous three months.

Spot gold traded near $4,534 per ounce on Monday, having reached a record high near $5,600 per ounce at the end of January.

Goldman Sachs maintains a bullish outlook, expecting gold prices to rise to $5,400 per ounce by year-end, similar to earlier forecasts by UBS and ANZ Bank.

However, in the short term, Goldman Sachs remains cautious on gold prices. The bank's analysts noted that gold "is a natural source of cash for private investors facing liquidity needs—for example, during equity market sell-offs when interest rates rise and growth expectations weaken."

Goldman Sachs' method for estimating central bank purchases is partly based on assumptions derived from observed fund flows in UK trade data. The analysts stated that the method has been updated, as this data "may no longer fully reflect" actual changes.