Goldman still bullish on gold, China underpinning demand outlook

Investing.com -- Goldman Sachs (NYSE:GS) said it remains bullish on gold in a note on Monday, citing both potential Fed rate cuts and China's unwavering demand as key drivers, which have helped push gold prices to record highs. This positive outlook comes despite rising US interest rates, which usually tends to lower gold prices. 

While the Chinese market is sensitive to price fluctuations, the brokerage sees structural changes creating an "unshakeable bull market" for gold in China. Lower interest rates and rising economic uncertainties are boosting demand, even as surging prices cool jewelry purchases. 

Additionally, China's central bank has been on a gold-buying spree in recent months, stockpiling hundreds of tonnes. Analysts say that these significant purchases are driven by concerns about US financial sanctions and the sustainability of US sovereign debt.

Goldman Sachs underscores the significance of central bank gold purchases, which have seen a threefold increase since mid-2022. "We still see very significant value in long gold positions, and maintain our bullish $2,700 forecast (a 12% increase over current spot prices) for 2025," they added.

This, coupled with the anticipated return of Western capital to the gold market due to potential Fed rate cuts, paints a highly optimistic long-term picture for gold. 

While the Chinese market might experience short-term adjustments in demand due to price sensitivity, the overall outlook remains positive.