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Goldman stays bullish on gold, however flags disadvantage threat from fewer Fed cuts

Goldman Sachs on Tuesday said less rates of interest cuts from the U.S. Federal Reserve are the secret disadvantage risk to its end2025 forecast for gold at $3,000 per ounce, not a stronger dollar.

We press back on the common argument that gold can not rally to $3,000/ oz by end-2025 in a world where the dollar stays stronger for longer, Goldman said in a note.

Gold rose to an all-time of $2,790.15 per ounce in October and has actually surged more than 30% this year, driven by central bank rate of interest cuts and growing geopolitical tensions.

Goldman expects a 7% increase in gold prices from 125 basis points of extra Fed cuts. However, if the Fed cuts by just an extra 25 basis points, the bank estimates the gold rate would rise to only $2,890 per ounce by end-2025, it stated.

Gold tends to value on expectations of lower interest rates, due to the fact that lower rates minimize the chance cost of holding a non-yielding property.

We disagree that dollar strength will halt central bank gold purchases, which drives 9% of the gold cost boost by end-2025 in our base case, since central banks buy gold internationally from dollar reserves, Goldman stated.

We find that the (Chinese yuan) depreciation and broader policy easing our financial experts expect have a roughly neutral net impact on China's retail gold need, it also kept in mind.

China's reserve bank

resumed buying gold for its reserves in November after a. six-month pause, official information by the People's Bank of China.

(source: Reuters)