Goldman Sachs Maintains Bullish Outlook for Gold Despite 13% Drop Since Iran War

Analysts at Goldman Sachs maintained their bullish outlook for gold despite the metal falling about 13% since the start of the Iran war at the end of February.

In a recent note, the bank said that the medium-term outlook for gold prices remains strong, expecting the yellow metal to reach $5,400 per ounce by the end of the year, supported by continued central bank buying and expectations that the Federal Reserve will cut interest rates twice this year.

However, the bank noted that gold still faces “tactical downside risks” in the short term and could fall to around $3,800 per ounce if the global energy supply crisis worsens. Nevertheless, the upside potential remains significant, particularly if the Iran war accelerates the diversification of investments away from traditional assets.

Gold prices have fallen 13% since the beginning of the war, after the decline in equity markets forced investors to liquidate positions. Markets also began pricing in tighter monetary policies from major central banks amid renewed inflation risks driven by rising global energy prices. However, Goldman Sachs believes that concerns about economic slowdown will ultimately outweigh inflation risks.

The note also indicated that fears of central banks expanding gold sales to support their currencies are unlikely to materialize. Instead, some Gulf countries may sell part of their U.S. Treasury holdings to support their currencies.