The move could be spurred by just a 1% shift in flow from treasury holdings to gold.
Goldman Sachs analysts believe that gold prices may surge to nearly $5,000 per ounce if the Federal Reserve’s independence is compromised and investors shift a small portion of their holdings from Treasuries into bullion.
“A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock and long-dated bond prices, and an erosion of the dollar’s reserve-currency status,” the investment bank’s analysts noted, according to a Bloomberg report.
The bank reportedly outlined several different scenarios for the yellow metal, including a baseline forecast for a rise to $4,000 an ounce by mid-2026, a so-called tail-risk scenario of $4,500, and an estimated jump to $5,000 if just 1% of the privately owned U.S. Treasury market were to shift to gold.
“Gold remains our highest-conviction long recommendation in the commodities space,” the analysts stated.
The Federal Reserve has come under attack from U.S. President Donald Trump for not lowering the benchmark interest rates, which Trump believes are hurting economic growth. However, policymakers, led by Fed Chair Jerome Powell, have taken a cautious stance, primarily to give themselves time to evaluate the impact of new tariffs on imported goods.
Trump also dismissed Fed Governor Lisa Cook late last month, alleging mortgage fraud, a charge denied by the banker. A federal court is expected to rule on her dismissal soon, which will test the extent of Presidential power.
Spot gold prices were trading at $3,536 per ounce at the time of writing, slightly below their all-time high of $3,578 on Wednesday. Retail sentiment on Stocktwits about the SPDR Gold Shares ETF (GLD) was in the ‘extremely bullish’ territory at the time of writing.
Echoing the concerns of Goldman analysts, economist and gold bull Peter Schiff weighed in on X. “CNBC aired a segment today on gold’s rise above $3,570 and what it might imply about stock market sentiment,” he posted. “But they ignored the bigger implication that gold’s rise might reflect a loss of confidence in U.S. fiscal and monetary policy, and a mass exodus from dollars into gold.”
In July, Greenlight Capital founder and president, David Einhorn — who famously bet against Lehman Brothers ahead of the 2008 financial crisis — said the precious metal’s stellar rally this year has been more about eroding confidence in U.S. fiscal and monetary policy than inflation alone.
Bullion prices have rocketed nearly 35% this year, outpacing the S&P 500 and Nasdaq stock indexes.
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