2 big reasons gold prices are set to surge 9% by early next year, according to Goldman Sachs

• Goldman Sachs predicts gold prices will hit $2,900 per troy ounce by early 2025.
• Falling interest rates and high demand from central banks in emerging markets drive this rise, Goldman said.

The price of gold is set to extend its record-setting rally to new highs by early 2025, according to a note from Goldman Sachs.

Aside from rising geopolitical tensions, which tend to favor safe-haven assets like gold, two other factors should help drive further upside for the commodity.

Those factors are falling interest rates and what appears to be an insatiable demand for the precious metal from central banks in emerging market countries.

Goldman boosted its gold price target to $2,900 per troy ounce from $2,700, representing upside of about 9% from current levels.

Such gains would come after gold prices have already rallied 29% year-to-date.

"We reiterate our long gold recommendation due to i) the gradual boost from lower global interest rates, ii) structurally higher central bank demand, and iii) gold's hedging benefits against geopolitical, financial, and recessionary risks," Goldman Sachs' Lina Thomas said.

Goldman highlighted that the central banks of emerging market countries like China are behind the structural advance of gold prices since 2022.

The bank estimates that institutional demand for the precious metal in the London OTC market has been strong through July, with year-to-date purchases averaging an annualized rate of 730 tons.

That represents about 15% of global annual production estimates.

"Moderating but still significant central bank purchases on the London OTC market drive about 2/3 of the expected rise of the gold price to $2,900/toz in early 2025," Thomas said.

In addition to lower interest rates and solid demand from central banks, gold should be top of mind for investors given the numerous risks in markets right now: an upcoming Presidential election, the potential outbreak of war between Israel and Iran, and economic uncertainty over the East Coast port strike.