Gold's potential rise: One financial institution predicts a possible $5,000 peak
In the first half of 2024, gold prices have experienced a significant surge, climbing from $2,064 per ounce to over $3,600. This represents a gain of approximately 76 percent.
The increased demand for gold can be attributed to a weaker U.S. dollar, which lowers the price for global buyers, and growing U.S. deficits and fiscal risks that have reduced confidence in the dollar. As a result, investors are turning to gold as a safer store of value.
Central banks have also been increasing their gold reserves, with 76% of central banks surveyed expecting their gold reserves to be higher in five years. This trend is expected to continue, driven by strong demand from these institutions.
The One Big Beautiful Bill Act, which locked in prior tax cuts and passed new tax cuts amounting to $3.4 trillion in deficit, is contributing to the anticipated rise in the nation's debt. This, along with unsustainable U.S. government spending, has led to long-term inflation worries, raising the interest rates that investors demand on longer-term U.S. treasury bonds.
Investors may also be turning to gold as a hedge against inflation due to its reputation as a store of value. The Goldman Sachs analysts' note calls gold their "highest-conviction long recommendation in the commodities space." In their report, they predict that gold could rise to nearly $5,000 in 2026, but they have more likely scenarios that see gold rising to $4,000 by mid-2026 or even $4,500.
If 1% of the privately owned U.S. Treasury market were to flow into gold, the gold price could rise to nearly $5,000 an ounce, according to the Goldman Sachs report. This shift could be due to rising bond yields and the risk of a declining bond price.
The expectation that the U.S. will continue to run significant deficits has led to a decline in the value of the U.S. dollar on foreign exchange markets. This, combined with the potential loss of the Federal Reserve's independence, could lead to higher inflation over time.
In times of economic uncertainty and turmoil, gold is often sought as a "turn to" asset. Investors may shift some holdings from U.S. Treasurys to gold to mitigate the impact of a decline in the dollar.
It's important to note that all investors are advised to conduct their own independent research into investment strategies before making an investment decision. The S&P 500 index has gained about 10 percent per year on average, with legendary investor Warren Buffett recommending an investment in an S&P 500 index fund as the best long-term investment for most individual investors.
In 2025 alone, gold has risen from $2,629, scoring a gain of about 38 percent in the space of two-thirds of the year. With these factors in play, it seems that gold's upward trend is likely to continue.
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