Goldman Sachs on Tuesday raised its 12-month gold price forecast to $2,300 per troy ounce (toz), aided by expectations of more downside in U.S. real interest rates and a favourable environment for the safe-haven metal.
The surge in gold prices is being driven by a potential shift in the U.S. Fed towards an inflationary bias to account for political tensions and an expectations that coronavirus infections will rise, Goldman said.
Increased safe-haven buying has pushed spot gold prices 27% higher so far this year, as bullion surged to a record high of $1,980.57 on Tuesday.
"We have long maintained gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows," Goldman said.
Real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge, it added.
"We see inflationary concerns continuing to rise well into the economic recovery, sustaining hedging inflows into gold ETFs alongside the structural weakening of the dollar, we see gold being used as a dollar hedge by fund managers," Goldman said.
The bank also raised its silver price forecast to $30/toz on a 3/6/12 month horizon "pulled upward by higher gold prices and better prospects for silver industrial demand, particularly in solar energy."
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