The price of gold may approach $5 thousand per troy ounce if the actions of U.S. President Donald Trump undermine the independence of the Federal Reserve System (Fed), analysts at Goldman Sachs believe. December gold futures on the Comex exchange on Thursday are cheaper by 1% to $3597.3 per ounce.
Since the beginning of the year the precious metal has risen in price by 35% due to the increased demand of investors for protective assets. At the same time, traditional safe haven assets, such as the dollar and U.S. government bonds, have sagged due to political uncertainty and budget risks.
Recently, the market has been following Trump’s attacks on the Fed’s leadership, including his attempts to fire Lisa Cook, a member of the Fed’s Board of Governors. That case is now in court.
“A scenario involving a breach of Fed independence could lead to higher inflation, lower equity and long-term bond markets, and undermine the dollar’s status as a reserve currency,” said Goldman Sachs’ Daan Streven.
Gold, on the other hand, is “an asset whose value does not depend on confidence in institutions,” the expert added.
The base forecast of the bank provides for the growth of gold price to $4 thousand per ounce by the middle of 2026. However, the mass exodus of private investors from dollar assets may push quotes even higher.
“If 1% of private investments in the US Treasuries market moves into gold, the price will reach nearly $5 thousand per ounce,” Goldman analysts said in a report.
The price of gold is rising in trading on Thursday amid fears of escalation of Russian military aggression in Ukraine.
Quotes of futures with delivery in December on the Comex exchange are growing by 0.6% – up to $2668.3 per ounce. Over the past five sessions, the precious metal rose in price by 3.8%.
Earlier this year, gold was over $2800 an ounce, but prices pulled back after Donald Trump’s victory in the US presidential election.
Peter Spina, founder of GoldSeek.com, said in an interview with MarketWatch that the precious metal could exceed $3,000 an ounce next year.
Gold, which ended trading last Thursday at an all-time high, continues to rise in price on Monday on expectations that the Federal Reserve will soon begin cutting interest rates, MarketWatch writes.
On Friday, stock exchanges in the U.S. and many European countries were closed due to Easter.
Quotes of June contracts for the precious metal were $2238.4 per ounce at the close of trading on New York’s Comex exchange on Thursday. On Monday, it rose 1.7% to $2276.9.
Gold added 8.9% in March and was up 8% for the entire first quarter.
The “unprecedented rally” was triggered by softer-than-expected U.S. inflation data, which reinforced expectations that the Fed could start lowering rates as early as June, IG Senior Market Analyst Sergio Avila said.
The U.S. consumer price index (PCE index) in February rose by 0.3% in February compared to the previous month, the Commerce Department said on Friday. The rise was weaker than analysts’ expectations, who had forecast inflation to remain at January’s 0.4% rate.
Growth in the PCE Core index, which excludes the cost of food and energy, slowed to 0.3% month-on-month last month from 0.5% in January. The dynamics matched the consensus forecast.
Markets estimate the probability of a Fed prime rate cut in June at about 70%, Avila said. And it is expected to be cut by 75 basis points in total over 2024 from its current range of 5.25-5.5% per annum.
“Lower interest rates create a favorable environment for gold, increasing its attractiveness as an investment asset,” the expert added.
“Gold investors are currently acting with the belief that the Fed will choose to cut interest rates regardless of whether inflation reaches its target level or not,” said Stephen Innes, managing partner of SPI Asset Management. Demand is also being driven by the fact that central banks in developing countries are increasing their holdings of the precious metal, he said.
