Central Banks Expected to Increase Gold, Goldman Sachs Remains High Target
Goldman Sachs expects central banks to increase gold purchases for foreign exchange reserves, which is expected to support a price recovery toward the end of the year. In a May 15 note, Goldman projected purchases to average 60 tons per month throughout 2026, higher than the 12-month average estimate of 50 tons in March based on an updated calculation framework.
According to Goldman, central bank interest in gold remains strong, and recent geopolitical developments have the potential to strengthen the diversification drive. On the price front, gold has struggled since the outbreak of the Middle East conflict, as rising energy costs have increased inflationary pressures, leading the market to assess a narrower window for monetary policy easing.
The combination of energy inflation and supply has also triggered a sell-off in global bond markets, increasing yields and pressuring non-yielding gold. From a macro transmission perspective, higher yields tend to strengthen the dollar and increase the “opportunity cost” of holding gold, thus hampering the recovery in the short term.
However, Goldman believes that support from official sector purchases could act as a cushion when private investor interest weakens. They also cited a World Gold Council report indicating central bank purchases of 244 tons in the first quarter, up from 208 tons in the previous three months.
In the spot market, gold was trading around US$4,530/ounce on Monday, well below its record high of nearly US$5,600 at the end of January. Goldman Sachs maintained its year-end target of US$5,400/ounce, in line with bullish views from UBS and ANZ, but emphasized caution in the near term.
The near-term risk Goldman Sachs cited is that gold could become a source of liquidity when investors need cash, for example, when the stock market corrects amid high interest rates and weakening growth expectations. Looking ahead, market participants are likely to consider signs of central bank purchases, the direction of yields and the dollar, and the dynamics of energy inflation, which will determine how quickly gold can regain momentum. (asd)
Source: Newsmaker.id
