Central banks are anticipated to ramp up their gold acquisitions, a move that Goldman Sachs Group Inc. believes will help buoy gold prices towards a recovery by the close of the year. Analysts at the financial institution project that these purchases will average 60 tons per month throughout 2026.
This upward revision in expected accumulation follows a recent trend. The 12-month moving average of central bank purchases stood at 50 tons in March, a notable increase from the previous figure of 29 tons. According to analysts Lina Thomas and Daan Struyven, a recent in-house survey indicates that there is ‘strong underlying interest in gold’ among central banks. They further suggest that ‘recent geopolitical developments are likely to reinforce diversification over time,’ contributing to this sustained demand.
Gold has experienced a challenging period since the onset of the conflict in the Middle East. Elevated energy costs have fueled global inflationary pressures, consequently making central banks more hesitant to ease monetary policy. With the geopolitical situation showing no signs of immediate resolution, global bond markets have seen sell-offs, placing downward pressure on non-yielding assets like gold.
Goldman’s assessment aligns with a more optimistic outlook from the World Gold Council. The latter estimated that central banks collectively purchased 244 tons of gold in the first quarter of the year, an increase from the 208 tons acquired in the preceding three months.
Despite the anticipated boost from central bank buying, Goldman Sachs maintains a cautious near-term perspective. The analysts noted that gold can serve as ‘a natural source of cash if private investors face liquidity needs — for example, if equity markets sell off amid higher rates and weaker growth expectations.’
The methodology employed by Goldman Sachs for estimating central bank buying has undergone an update. Previously, it relied partly on assumptions derived from flows observed in UK trade data. However, the analysts have revised this approach, acknowledging that these figures may ‘no longer fully reflect’ current shifts in buying patterns.
Goldman Sachs has reiterated its bullish target for gold prices, forecasting a climb to $5,400 an ounce by the end of 2024. This projection echoes similar recent calls from other financial institutions, including UBS Group AG and ANZ Group Holdings Ltd. The expected increase in central bank demand is seen as a key driver for this anticipated price appreciation.
