Sticky inflows are driving this huge rally in gold, says Goldman Sachs' Daan Struyven

Core Viewpoint - Gold and silver are experiencing their best week in five years, with Goldman Sachs raising its gold price target to $4,900 by December next year from $4,300, driven by strong inflows from private investors and central banks [1][4]. Group 1: Gold Market Dynamics - The rally in gold is primarily fueled by persistent inflows from long-term investors and central banks, rather than speculative trading [2][3]. - Central banks are accelerating their gold purchases, which is broadening the market's diversification rally that began in 2023 [4]. - The gold market is relatively small, approximately 70 times smaller than the US Treasury market, meaning that even minor diversification steps can significantly impact prices [5][6]. Group 2: Investment Outlook - The bullish forecast for gold is supported by central bank buying, which could provide about 15 percentage points of upside [7]. - Historical trends indicate that central bank gold buying cycles are typically long-lasting, with selling unlikely unless there is a significant easing of geopolitical risks or fiscal policy concerns [8]. - Current uncertainties regarding trade, credit, and fiscal policy are contributing to the bullish outlook for gold [9]. Group 3: Silver Market Insights - The medium-term outlook for silver prices is also positive, as Fed cuts are expected to boost ETF inflows, although the market is more volatile compared to gold [10]. - Silver's price movements are influenced by industrial demand, but the lack of central bank buying makes its outlook less certain than gold's [11][12].