Goldman Sachs Group has stated that its forecast for gold to reach $5,400 per ounce by December 2026 still faces significant upside risks.
The bank's analysis points out that the sharp price swings in gold and silver during January were primarily driven by Western capital flows rather than Asian speculation, with silver experiencing a more pronounced correction than gold due to persistent liquidity tightness in the London market.
Regarding silver specifically, Goldman Sachs indicated that the ongoing liquidity constraints in the London market have added a layer of extreme price behavior on top of the volatility already driven by call option structures in the gold market.
The firm noted that gold's robust performance in 2025, followed by a strong start to 2026, reflects deep-seated structural forces rather than speculative excess, with central bank reserve diversification emerging as the dominant factor driving price movements.
According to the bank, the global shift in central bank allocations away from the US dollar and towards precious metals has substantially altered the demand structure for gold. Unlike equity or fixed income markets, the gold market is relatively small, meaning that even modest changes in official sector demand can have an outsized impact on prices. Goldman Sachs suggests this dynamic helps explain the recent speed and scale of the gold price appreciation.
The firm's analysis reveals that financial speculators' participation in the gold market remains limited. Only a small fraction of global gold inventories is held by financial speculators, indicating that the current rally is not fueled by the leveraged positions typically associated with market mania. Instead, the price action is being driven by long-term balance sheet decisions from central banks seeking to reduce their reliance on US dollar-denominated assets.
Goldman Sachs also views the recent surge in gold prices as a partial revaluation following a prolonged period of underperformance. Between 2010 and 2020, gold prices largely traded sideways while growth-oriented equities delivered substantial returns. The bank believes the current cycle reflects a rebalancing of asset preferences rather than the final stages of a bubble.
While Goldman Sachs does not expect gold to maintain the exponential pace of gains seen over the past year, it remains optimistic about the overall upward trajectory. The bank sees room for further price appreciation as the reserve diversification process continues, even if returns become more moderate and volatility increases along the way. Importantly, Goldman Sachs has not detected signs of a broad-based bubble across the precious metals complex.
From an asset allocation perspective, Goldman Sachs is advocating for an upgraded version of the traditional barbell strategy. The bank argues that pairing equities with gold is more compelling than pairing them with fixed income assets, noting that precious metals can offer diversification benefits in an environment characterized by geopolitical uncertainty, widening fiscal deficits, and a transitioning monetary system.
Within this framework, gold's function leans more towards being a strategic hedge against structural changes in the global monetary system rather than a tactical trade. As central banks reassess their reserve compositions and investors adapt to a world with a diminished centrality of the US dollar, Goldman Sachs believes gold's role in investment portfolios is likely to remain elevated long after the current cycle.
The barbell strategy involves holding two contrasting asset classes at opposite ends of the risk spectrum; in the current context, this means holding equities for growth and holding gold for protection, while minimizing exposure to the middle ground, traditionally occupied by bonds.
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