Goldman Says Stay With Gold in 2025

Out of Oil, Into Gold

A brand new report from Goldman Sachs, titled "Go for Gold," is out. In it, they advise clients ot roll out of industrial commodities like Oil and  Copper and into Gold. They reiterate their target up front. 

From the Goldman Report Go for Gold: 

"Gold remains the preferred near-term long position, with a price target of $2,700 per ounce by early 2025."

 Bottom Line. the latest Goldman Sachs report believes Gold is the only game in town for Commodities over the next month or so at least. 

2- A Tactical Shift in Commodity Strategy

“The 2024 [Commodity Supply] Deficits Basket is closed with an 8% gain as cyclical support softens.” - Goldman

The Bank outlines a more cautious approach to commodity investments, reflecting softening cyclical support. While commodities remain essential for portfolio diversification due to their hedging capabilities, particularly against supply disruptions, the analysis indicates a strategic pivot.

Their 2024 Deficits Basket is now closed at an 8% gain. The focus shifts to high-conviction trades, with long positions in gold and short positions in European natural gas. This shift is driven by weakening demand from China and a more challenging macroeconomic environment.

3- Oil Market Caution

The report signals a cautious stance on oil, with Goldman revising its Brent crude price forecast to a lower range of $70-85 per barrel.

This adjustment stems from stronger-than-expected supply, particularly in the U.S., and a slowdown in Chinese demand.

From the Goldman Sachs report: Go For Gold

"We continue to recommend that oil producers hedge their exposure by buying puts, which still looks relatively cheap."

The analysis suggests that oil prices may experience gentle declines, barring any significant supply shocks. Oil producers are advised to hedge their exposure through put options, given the current market uncertainties.

4- Delayed Copper Rally

"We now see the copper rally materializing post-2025, with a revised target of $10,100 per ton."

Copper's anticipated rally has been delayed, with the Bank adjusting its forecast to post-2025. Despite strong green metals demand, copper inventories in China have built up, contrary to expectations.

The analysis suggests that the expected depletion of copper inventories and the associated price rally will occur later than initially projected. This delay leads to a revised 2025 price target of $10,100 per ton, down from the previous $15,000 expectation.

5- Strong Bullish Case for Gold

"Central bank gold purchases have tripled since mid-2022, driven by fears of U.S. financial sanctions and sovereign debt concerns."

Gold remains the Bank's preferred near-term long position, with a maintained price target of $2,700 per ounce by early 2025. The analysis attributes this bullish outlook to several factors:

• Central bank gold purchases have tripled since mid-2022 due to fears of U.S. financial sanctions and sovereign debt concerns, which are expected to continue.
• Imminent Federal Reserve rate cuts are likely to bring Western capital back into the gold market.
• Gold's value as a hedge against both geopolitical risks and macroeconomic uncertainties is underscored as a compelling reason for maintaining long positions.

Their report suggests that as the U.S. dollar faces potential weakening and global tensions persist, gold's appeal as a safe-haven asset will only strengthen.