In a note published Sunday, commodity analysts at Goldman Sachs said they expect higher gold prices through 2024. In the report titled “Gold’s shine is returning,’ the analysts raised their 12-month price target to $2,050 an ounce.
“The potential upside in gold prices will be closely tied to U.S. real rates and dollar moves, but we also expect persistent strong consumer demand from China and India, alongside central bank buying to offset downward pressures from upside growth surprises and rate cut repricing,” the analysts wrote.
Goldman’s 2024 forecast comes as gold tested a critical resistance level around $2,010. December gold futures last traded at $2,010.80 an ounce, up 0.40% on the day.
Goldman’s 12-month forecast is up from its previous $2,000 target published at the start of the year. The investment bank’s cautiously optimistic outlook on gold comes as it expects the U.S. economy to remain resilient through 2024.
Last week, the bank’s economists said they don’t expect the Federal Reserve to cut interest rates until the end of the fourth quarter of next year. The economists see only a 15% chance the economy will fall into a recession next year.
Goldman’s hawkish outlook is currently at odds with market forecasts, which is helping to support gold prices as rate cut expectations have weakened the U.S. dollar.
According to the CME FedWatch Tool, markets see a 25% chance of a rate cut in March, but many economists have said that is probably too early. Markets see a more than 50% chance of the Fed cutting in May, and an even higher chance of a cut in June.
Goldman’s positive outlook for gold comes as it looks for solid returns in broad commodities in the coming year. In its 2024 commodity outlook, the bank said they expect the oil-heavy S&P GSCI Commodity Index to show returns of 21% next year, led by a 31% gain in the energy sector and a 17% rise in industrial metals.
“We recommend going long commodities in 2024, as we expect somewhat higher spot commodity prices from an improving cyclical backdrop, significant carry returns from structural tailwinds, and see hedging value against negative supply shocks,” the bank said in a note published last week.
The analysts added that gold will remain an important safe-haven asset in 2024.
“Energy and gold can also be an effective hedge against negative supply shocks, from geopolitical or other developments, in scenarios where other assets (especially risk assets) suffer from lower growth,” the bank wrote.