Spot gold prices hit a record high of US$3,578.50 per ounce last week on expectations of a U.S. Federal Reserve interest rate cut later this month, while lingering global uncertainties kept safe-haven demand firmly in play, according to Reuters.
Goldman Sachs predicts that gold prices could surge well above its US$4,000 per troy ounce baseline by mid-2026, should private investors diversify more heavily into the metal.
“Gold remains our highest-conviction long recommendation,” Goldman Sachs said in a note last week, while forecasting gold prices at US$3,700 by the end of 2025 assuming strong central bank buying.
However, this baseline view does not factor in a major shift by private investors out of U.S. dollar assets into gold, a scenario that could push prices to as high as US$4,500 per ounce.
It also said that a loss of Fed independence could trigger higher inflation, a rise in long-end bond yields, weaker equities, and a decline in the dollar’s reserve currency status while gold, as a store of value not reliant on institutional trust – stood to benefit.
U.S. President Donald Trump has intensified efforts to exert control over the Fed, whose ability to manage inflation effectively is widely seen as requiring freedom from political influence over interest rate decisions.
Goldman Sachs also estimated that, assuming all else remains constant, gold prices could approach US$5,000 per troy ounce if 1% of the private money invested in the U.S. Treasury market was reallocated to gold.
The precious metal is viewed as a safer asset for investors during times of economic uncertainty, and its price rose earlier this year after US President Donald Trump announced wide ranging tariffs which have upset global trade.
Analysts say the price has also been lifted by expectations that the US central bank will cut its key interest rate, making gold an even more attractive prospect for investors.
Adrian Ash, director of research at BullionVault, told the BBC’s Today programme that the rise in gold prices over the past few months is really down to Trump and “what he’s done to geopolitics [and] what he’s done to global trade”.
“It was really the US election last year that really put a fire under it,” he said.
Analysts also cite worries over the independence of the US central bank, the Federal Reserve, as another factor driving the gold price.
Trump has launched repeated attacks on the Federal Reserve’s chair, Jerome Powell, and recently attempted to fire one of its governors, Lisa Cook.
Derren Nathan from Hargreaves Lansdown said it was Trump’s “attempts to undermine the independence of the Federal Reserve Bank” that was “driving renewed interest in safe haven assets including gold”.
On Monday, the head of the European Central Bank Christine Lagarde warned that if Trump were to undermine the independence of the Fed, it would represent a “very serious danger” to the global economy.
She said if the Fed was forced to respond to Trump’s politics, it would have a “very worrying” impact on economic stability in the US, and therefore in the rest of the world as well.
Mr Ash added that when the price of gold surges because of investor interest, it was usually tempered by a slowdown in buying from China and India two of the biggest markets for gold jewelry.
But this time, he said gold was continuing to find demand in China and India as, rather than exiting the market during times of high prices, jewelry buyers turn towards buying investment gold products such as bars or coins.
Gold’s general price increase also comes from a “raft” of other reasons, including Russia’s invasion of Ukraine which has added to a climate of general political uncertainty, said precious metals analyst Suki Cooper from Standard Chartered.
She adds that this year, the impact of changing trade policies on inflation and supply chains has also fueled the gold price.
“Gold has found added support from US dollar weakness earlier in the year as the preferred safe haven,” she concluded.
