Gold Still Has Plenty of Room to Run, Says Goldman Sachs

The main reason driving Goldman’s bullish forecast is continued demand from emerging market central banks. According to the World Gold Council survey conducted between February and May, a record 45% of the 76 global central banks expect to boost their gold reserves over the next 12 months.

Gold Backed by Uncertainty, Pressured by Fed Path

Furthermore, the firm believes that the U.S.-Iran war and other potential geopolitical developments could boost private demand for gold. Gold is viewed as a safe-haven asset and tends to perform well during periods of uncertainty.

However, a hawkish Fed could potentially spoil the party. The Fed is expected with 41.9% odds to raise rates by 25 bps by the end of the year, according to the CME FedWatch tool. The odds of two hikes sit at 26.7%. Gold generally performs better during periods of lower rates since it doesn’t pay out interest. In other words, the opportunity cost of holding gold compared to interest-bearing assets, like Treasuries, is less with lower rates.Disclaimer & DisclosureReport an Issue