Goldman Sachs Warns Gold May Reach $5,000

Goldman Sachs Warns Gold May Reach $5,000 if Federal Reserves Independence is Compromised KEY TAKEAWAYS
A new Goldman Sachs Group, Inc. (GS) analysis calculates that if investors shifted just 1% of the privately owned U.S. Treasury market to gold, prices could reach nearly $5,000 per troy ounce (toz).
Goldman also warned that damage to the independence of the U.S. Federal Reserve would likely lead to higher inflation and lower stock and bond prices.
JPMorgan Chase Co. (JPM) is also out with an analysis, saying there are already signs of a Fed independence trade as major players react to the Trump administrations attacks on the central banks independence. Gold has surged more than a third this year to over $3,500 per troy ounce, but Goldman Sachs warns that golds price could increase dramatically if the Trump administrations attack on the independence of the U.S. Federal Reserve is successful.
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They say that would trigger a flight from traditional safe havensassets people run to when markets get shakytraditionally, the U.S. dollar and government bonds.In a major analysis released this week, the investment bank outlined scenarios where gold could reach nearly $5,000 per ounce, noting that if 1% of the privately owned U.S. treasury market were to flow into gold, the gold price would rise to nearly $5,000 [per troy ounce]. Thats 42% above its current price.

Why the Federal Reserves Independence Is Under Threat
The warning comes as President Donald Trump has made significant moves to exert control over the Federal Reserve, including efforts to remove Fed Governor Lisa Cook, which is now being challenged in the courts. These moves have Wall Street bracing for what JPMorgan analysts in their own major report this week called a Fed independence trademoves to prepare for a world where the dollar and U.S. Treasurys no longer feel like the safest places to park your money.Investors fear that a politicized Fed would slash rates to juice the economy for short-term gain, stoking fears of higher inflation down the road.
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Goldmans analysts were quite direct about the implications: 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 dollars reserve currency status. In contrast, gold is a store of value that doesnt rely on institutional trust.

For these reasons, Goldman concluded that gold remains our highest-conviction long recommendationthat is, the best long-term investment right now. The Market Is Already Shifting
In its analysis, J.P. Morgan noted what it found as it tracked the moves of major investors since early August, when Trumps attacks on the Fed intensified. They focused on trades in the following assets:Gold futures: Sharp increases in bets that gold will rise.
Treasury bonds: Investors are selling short-term government bonds while keeping long-term onesa pattern that typically signals worry about inflation.
The yield curve: The gap between short- and long-term interest rates is widening, something that typically happens when faith in the Fed starts to crack.
Value stocks: Money is also flowing into value companies (banks, energy, industrials) and away from tech stocksa typical shift when investors are worried about inflation.
In short, many on Wall Street arent waiting for a headline crisistheyre already getting into their defensive position.The Mathematics Behind the $5,000 Target
Goldman broke down the math this way: Private ownership of the U.S. Treasury marketAmericas IOUsis worth about $57 trillion. If investors were to move just 1% of that money into gold, it would mean $570 billion flowing into the gold market, which is tiny by comparison. To put this in perspective, the analysts noted that the entire gold exchange-traded fund (ETF) marketwhat regular investors use to buy gold as they would a stockis about the same size as what would be moving over from Treasurys.That extra demand, they argue, would cause the price of gold to rise to the $5,000 target. In fact, Goldmans normal forecast already predicts gold reaching $3,700 by the end of 2025 and $4,000 by mid-2026, the result of their expectation that central banks will continue their current gold buying spree.

JPMorgans analysis is a bit more conservative, arguing that an extended attack on the Feds independence could move the price of gold to above $4,500 in 2026.What This Means for Your Portfolio
For those concerned about these analyses, experts typically suggest that gold represent up to 5% to 10% of a diversified portfolio.
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The easiest ways to add gold to your holdings are to buy shares of gold ETFs (like GLD or IAU), which trade like stocks, or to purchase physical gold from reputable dealersthough the latter involves storage and insurance costs.However, its crucial to keep in mind that gold doesnt pay dividends or interest, and its price can swing wildly. While Goldmans projection is possible, its not a sure thing, but a what-if scenario. Goldmans baseline forecast of $3,700-$4,000 is already 6% to 15% above the current gold price, and the $5,000 forecast would require a fundamental breakdown in trust in U.S. institutions that one would hope wont ever materialize.

The Bottom Line
Goldman Sachs analysts expect gold to climb steadily to $3,700 to $4,000 over the next couple of years, but the risk of direct administration control over the Federal Reserve could spark a much sharper rally. If investors lose faith in the dollar and U.S. bonds, gold could become the go-to safe haven, pushing prices toward $5,000.