Attention! Goldman Sachs Cuts Gold Target to $2910

Gold prices surged by 27% in 2024, hitting a record high, thanks to a combination of U.S. monetary easing, rising demand for safe-haven assets, and central banks worldwide continuing to purchase gold. However, since November 2023, the price growth has slowed. This is mainly due to the stronger U.S. dollar following Donald Trump's election and the Fed's shift towards a more cautious approach in cutting rates amidst ongoing inflation concerns.

Goldman Sachs has adjusted its gold price forecast, predicting that the slower pace of U.S. monetary policy easing in 2025 will limit demand for gold ETFs. As a result, Goldman now expects the price of gold to reach $2,910 per ounce by the end of 2024, down from its previous projection of $3,000 per ounce. The firm expects gold to reach $3,000 per ounce by mid-2026 as the Fed continues easing.

The firm also expects the Fed to cut interest rates by 75 basis points this year, lower than the previously forecast 100 basis points, though this is still more dovish than current market expectations.

U.S. Employment Data and Inflation Concerns

This Friday, the market will closely watch the U.S. monthly employment report, which is expected to show a slowdown in job growth for December, while the unemployment rate holds steady at 4.2%. These figures could play a significant role in shaping future Fed policy, especially considering the central bank has already indicated that rate cuts will be more measured in 2024.

As Donald Trump is set to be inaugurated on January 20, his economic policies, including corporate tax cuts, deregulation, and trade protectionism, may stimulate corporate profits and boost economic growth. However, they also carry the risk of increasing inflationary pressures. For example, Trump's proposal to reduce the corporate tax rate from 21% to 15% could fuel demand but may also push up prices, creating inflationary challenges for the Fed.

Impact on Gold's Outlook

Overall, while the gold market has benefitted from supportive U.S. monetary policies and global uncertainty, the slowing pace of Fed rate cuts in the coming years may reduce upward pressure on prices. Investors will continue to watch key economic data, including U.S. employment reports and inflation trends, to gauge the future trajectory of gold. The interplay between inflation, monetary policy, and global economic conditions will likely be critical in shaping gold's price movements in the near future.