The gold price (XAU/USD) traded close to $4,300 on Tuesday after retreating from recent peaks. Stronger US economic data and higher Treasury yields reduced investor interest in the non-yielding precious metal. Even after the latest pullback, Goldman Sachs maintains a constructive longer-term outlook, citing continued central bank accumulation as a key source of support for gold prices.
Goldman Sachs notes that central banks purchased another 31 tonnes of gold in May, significantly above the long-term monthly average and in line with the steady accumulation recorded over the past three years.
“Strong central bank buying in May provides a price floor.”
According to the bank, official-sector demand has changed the structure of the gold market by reducing the risk of deep and prolonged corrections.
“We continue to expect structurally strong central bank demand.”
Goldman Sachs acknowledges that higher real interest rates may continue to create temporary selling pressure, particularly through exchange-traded funds and speculative positions.
“Rates pressure is likely to be temporary.”
Although higher yields have traditionally weighed on gold, the bank argues that central bank purchases are now becoming an increasingly important counterbalance.
“Official-sector purchases should cushion downside risks.”
Near-Term Gold Price Forecast: Goldman Sachs Maintains Longer-Term Bullish View
Goldman Sachs expects short-term volatility to continue as markets reassess the outlook for US interest rates. However, the bank believes any weakness caused by higher yields is likely to be temporary because central bank demand remains exceptionally strong.
“We expect continued robust official-sector buying to underpin prices.”
For gold investors, Goldman Sachs argues that the current environment differs considerably from previous periods of rising yields. Ongoing reserve diversification by central banks has created a durable source of demand that should continue to support gold prices over the medium term.
