Goldman Sachs sees gold testing $5,000 if Fed's independence is 'damaged'

Until now, Goldman Sachs’ most-bullish projection had projected gold prices at about $4,000 by mid next year, owing to trade tariffs and concerns over high US debt, making it a safe bet in an unstable scenario.

Goldman Sachs has increased its most bullish projection for gold prices this year, stating that $5,000/oz is possible should the credibility of the US Federal Reserve gets damaged, and investors convert part of their treasury holdings into bullion.

Until now, Goldman Sachs’ most-bullish projection had projected gold prices at about $4,000 by mid next year, owing to trade tariffs and concerns over high US debt, making it a safe bet in an unstable scenario.

"...gold is still in a bull market at this point in time. Rate-cut expectations and worries over the Federal Reserve's independence are going to add to safe-haven demand," Reuters quoted GoldSilver Central's MD Brian Lan.

Some experts believe that rising concern over US central bank's independence may be undermining trust in dollar-denominated assets, pushing investors toward gold. A sustained buying by global central banks in recent quarters and the ongoing global economic uncertainty due to the Ukraine war and US-China trade tussle too have added to gold's safe haven appeal.

"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," Goldman Sachs analysts, including Samantha Dart, wrote in the latest note.

Reuters quoted Peter Grant, VP and senior metals strategist at Zaner Metals, who said the gold rally further room to run. "...with short-to-medium-term targets around $3,600 to $3,800, and the breakout pattern suggesting $4,000 could be within reach by late first quarter next year," Grant said.