Investors should “go for gold” with the precious metal standing out as the best commodity to hedge against geopolitical and financial risks, according to Goldman Sachs. Gold should rally to $2,700 per ounce by early 2025 with the Federal Reserve poised to start cutting rates in September, bringing Western capital back into the precious metal, Goldman’s team of commodity analysts told clients in a Monday research note. Central banks in emerging market countries, meanwhile, are continuing to buy gold — with purchases tripling since the middle of 2022 amid fears of U.S. financial sanctions and a mountain of sovereign debt, the analysts wrote. Goldman is taking a more selective approach to commodity investing as soft demand in China weighs on crude oil and copper prices. The investment bank has slashed its Brent oil outlook by $5 to a range of $70 to $85 per barrel, and delayed its copper target of $12,000 per metric ton until after 2025. “In this softer cyclical environment, gold stands out as the commodity where we have the highest confidence in near-term upside,” Goldman’s research team led by Samantha Dart told clients. Gold futures have surged nearly 22% this year, to trade above $2,500 per ounce. Separately, Bank of America believes in a gold target of $3,000 per ounce sometime in the next 12 to 18 months, analysts there said in a report out Tuesday. Although flows of capital do not support this price right now, an increase in non-commercial demand triggered by Fed rate cuts could lift the precious metal to this target, according to the bank. @GC.1 YTD mountain Gold futures in 2024. Copper should average $10,100 per metric ton in 2025, well above this year’s average of $9,231 but far below Goldman’s previous expectation of $15,000 for next year. The delayed copper rally will likely weigh on aluminum demand, according to Goldman. The Wall Street firm is also bearish on nickel and has temporarily suspended its coverage of zinc. China’s weak real estate sector provides only limited upside for steel, which presents challenges for iron ore prices. “With China typically responsible for 2/3 of commodities demand growth before the pandemic, we believe it’s challenging to build significant deficits in these markets without strong China demand,” the Goldman analysts wrote. Goldman still maintains a long-term view that metals important for the energy transition away from from fossil fuels, such as copper, will ultimately reach scarcity pricing as demand grows, investment declines and inventories fall.
