Investors should "go for gold" of all the commodities available to buy as it looks poised to continue its record rally into 2025, according to Goldman Sachs.
The bank said in a Sunday note thatgoldshould hit $2,700 per ounce in early 2025, representing potential upside of about 7% from current levels.
Gold traded at about $2,523 per ounce Monday morning and is up about 21% year-to-date,outpacing the gains of the S&P 500 so far this year.
"In this softer cyclical environment, gold stands out as the commodity where we have the highest confidence in near-term upside," a team of Goldman Sachs analysts led by Samantha Dart said.
Dart highlighted that other commodities like oil, natural gas, and copper don't look nearly as attractive as gold based on the current setup.
Dart offered three reasons why investors should continue to buy the shiny metal.
- "We believe that the tripling in central bank purchases since mid-2022 on fears about US financial sanctions and US sovereign debt is structural and will continue, reported or unreported."
- "Imminent Fed rate cuts are poised to bring Western capital back into the gold market, a component largely absent of the sharp gold rally observed in the last two years."
- "Gold offers significant hedging value to portfolios against geopolitical shocks including tariffs, Fed subordination risk, and debt fears."
Dart estimated that gold could surge 15% in a hypothetical scenario where credit spreads widen due to rising debt concerns or if financial sanctions equivalent to the rise seen since 2021 occur.
The demand for gold from China's central bankhas softened recently as gold prices have surged.
But Dart said that if gold prices decline slightly, China's central bank would likely re-enter the market with big purchase orders, protecting against a big downside move in the price of commodity.
"We believe that the same price sensitivity also insures against hypothetical large price declines, which would likely reinvigorate Chinese buying," Dart said. "Our preferred near-term long is gold," she added.
