Gold Enters an "Elongated Pause" Rather Than a Peak, Goldman Sachs Forecasts New Record Highs

Goldman Sachs says the recent cooling in gold prices marks a temporary pause rather than the end of its historic bull run, forecasting that bullion could surge to new record highs once global uncertainties ease. According to Tony Kim, Global Head of Metals Trading at Goldman Sachs, the metal has lost momentum since its January peak, but the current phase is an "elongated pause" rather than a trend reversal. Spot gold dropped 2.4% to $4,342.20 an ounce on September 1 amid a stronger dollar and rising Treasury yields, with further downward pressure following strong US jobs data on September 4 that raised expectations of Fed rate hikes. Still, analysts note the $4,000-an-ounce area offers an attractive floor for investors building long-term positions.

The pause stems from two simultaneous developments. First, policy ambiguity at the Federal Reserve under Chair Kevin Warsh, as investors try to gauge the trajectory of rates and inflation against President Trump's economic agenda. Second, the US-Iran conflict has disrupted global energy, agriculture, and metal flows. Kim noted the war has disrupted the regular recycling of petrodollar revenues from energy-exporting nations, which traditionally channel a portion of their trade surplus into precious metals - causing speculative positioning across institutional trading desks to drop sharply.

Despite these near-term headwinds, gold's fundamentals remain solid, as central banks are absorbing global supplies at an unprecedented rate. Official sovereign purchases have more than doubled - from 400-500 tonnes a year before the Russia-Ukraine war to 1,000-1,100 tonnes annually today. With total global mine production at around 3,500 tonnes a year, central banks now directly absorb nearly a third of newly mined gold, sharply shrinking the physical supply left for jewellery, ETFs, bars, and coins - meaning even a modest revival in private investor interest could spark sharp price swings.

Goldman Sachs also pointed to a structural shift in gold's relationship with interest rates. While gold typically struggles against bonds when rates stay elevated, investors are increasingly worried about runaway public debt and fiscal sustainability in major economies including the US and Japan. As rising bond yields are read as a symptom of government borrowing distress, gold is being embraced as a core hedge against the broader debasement of fiat currencies - paving the way for it to resume its record-breaking rally.