Synopsis:

Goldman Sachs maintains a bullish outlook on gold, targeting $2,700 per ounce for early 2025. The firm recommends going long on gold due to increasing central bank purchases, anticipated Fed rate cuts, and gold's role as a hedge against geopolitical risks.

Key Points:

1. Central Bank Purchases:

   • Central bank gold purchases have tripled since mid-2022, driven by concerns about US financial sanctions and sovereign debt.
   • This trend is expected to continue, providing a structural support to gold prices.

2. Fed Rate Cuts:

   • Imminent Fed rate cuts are anticipated to attract Western capital into the gold market, which has been largely absent from the recent gold rally.
   • The influx of capital is expected to further drive up gold prices.

3. Hedging Value:

   • Gold serves as a valuable hedge against geopolitical uncertainties, including trade tariffs, risks associated with Fed policies, and concerns over national debt.
   • Its role as a safe-haven asset becomes increasingly relevant in times of instability.

Conclusion:

Goldman Sachs' recommendation to go long on gold is underpinned by structural increases in central bank purchases, expected Fed rate cuts, and gold’s effectiveness as a hedge against various geopolitical and economic risks. The target of $2,700 per ounce by early 2025 reflects confidence in these driving factors.