Goldman Sachs Forecasts Huge Shift in Gold Prices

Forecasts for $3,000 gold in the next few months, Goldman Sachs says run will extend into 2026

Bullion.Directory precious metals analysis 14 January, 2024
By Peter Reagan
Financial Market Strategist at Birch Gold Group

Surprising quite a few analysts, gold passed $2,700 despite a “strong U.S. dollar” and so-called high interest rates. (At their peak, these “high interest rates” never exceeded the low end of the historically normal range.)

Interest rate cut talks have mostly been put on the backburner for now. It would have been within accepted sentiment for gold to pull back to low $2,600 or even high $2,500. After all, everyone knows that gold offers no yield, and when interest rates are “high” savers can just deposit their cash in a savings account. Surprising many analysts, that didn’t happen – and gold’s price kept on rising.

The very same naysayers that have called for a gold correction throughout 2024 have now been trying to claim gold is “fighting against the headwinds.” As if the increase in gold’s price is somehow unlikely…

Isn’t it a more rational explanation that gold is experiencing increased demand instead? Which has proven strong enough to alter the traditional inverse correlation with the dollar?

In what some will interpret as a slightly bearish forecast, Goldman Sachs says that rate cut delays will also push back gold’s rise to $3,000 to Q2 2026. (This specific scenario is something we’ve outlined already, noting that it’s one of the most bullish cases for gold.)

I expect a delay reaching $3,000/oz. only means that gold’s price will remain elevated for that much longer.

And elevated prices are becoming a top story of their own.

With the exception of 2019 (during which gold still posted some impressive gains), we are now in the sixth consecutive year of persistently elevated gold prices.

The only notable drop was during the summer of 2023, when interest rates hit their 50-year high and gold fell in response. It was summer, after all, the season during which gold sometimes refuses to gain. Still, it held $1,650, the high level from 2019, and then reversed direction in an almost startling fashion.

Six years of high gold prices with a seventh being scheduled already means some things need to be gotten out of the way.

For starters, we will have to either abandon 2008-2011 comparisons or alter them significantly. That period looks increasingly irrelevant. This is no three-year crisis with a clear culprit that is sending gold flying. Barring the lockdowns, most analysts have simply ignored fundamentals and simply shrugged when asked pinpoint the cause of gold’s gains since the start of the decade.

That tells us gold is gaining on a much more solid footing and isn’t dependent on black swan events to support its price.

For comparisons, we might indeed need to go all the way back to the 1970s, when gold was untethered from the U.S. dollar. In other words, this is the most important time in gold’s history since the end of Bretton-Woods.

Hearing Goldman Sachs say it was exciting, as everyone has been sort of pledging their forecast to 2025. This now opens many other possibilities, such as that bullish forecasts projecting gains all the way into 2028 and even 2030 might have legs to stand on.

Needless to say, should gold have a decade of gains under its belt, it will have little falling room. It might pull back, sure, but to where? $2,500? $2,300? Those are still solid prices!

Not everyone expects a big delay due to rate cuts, though, as firms like ICICI believe gold could hit $2,900 to $3,000 in the next few months:

As has been the case for more than a year, gold investors find themselves in a rare spot. Opening the news and checking the headlines is practically guaranteed to bring good news.

Who really owns Argentina’s gold reserves?

We may be one of the few bigger gold news outlets to report on the struggle between Argentina and its creditors. (Strange, considering how relevant and amusing the story is.)

Cutting a long story short, investors who got involved in Argentina’s state-run oil company, then had their investment “renationalized” out from under them, are suing for damages. It’s an affair dating back to 2012, and the lawsuit, which involves multiple international firms and is being run through a New York court, has been deemed in favor of the plaintiffs. They’ve been awarded $16.1 billion in damages.

There’s just one little problem… Considering Argentina’s less-than-amazing economy (despite Milei’s recent good work), there’s no money to pay the damages.

So the aggrieved investors propose their $16.1 billion should come out of the Central Bank of Argentina (BCRA)’s 62-ton gold bullion reserve.

Argentina isn’t having it.

“The Republic has repeatedly informed the plaintiffs that only the BCRA, a legally separate entity, holds the gold reserves. Citing a single news article from almost six months ago, the plaintiffs claim, ‘It has been widely reported that Argentina’s gold reserves have been transferred to London’,” said the report to the New York judge.

…“As we have informed the plaintiffs, the Republic does not possess information about any movements of the BCRA’s gold reserves. These matters fall exclusively within the remit of the BCRA’s reserve management,” the submission continued.

Apparently, not unlike as with our own Federal Reserve, Argentina had the good sense to cover its bases and make the central bank a legally separate entity from the state. (It’s a lot like the way precious metals depositories custody gold and silver on their customers’ behalf. Even if Brink’s were to go bankrupt, creditors wouldn’t be able to legally claim the contents of Brink’s vaults.)

Being legally separate, the BCRA simply isn’t responsible for paying the Argentine government’s bills. The government can say, “That’s not our gold, it’s their gold,” pointing to the central bankers.

But the story gets better!

The Argentine government can claim that it has no knowledge of its central bank’s current gold holdings or transactions.

Argentina’s Minister of Economy previously said some of the gold has been leased abroad for a profit. London vaults were mentioned.

Note: In case you’re not aware, “gold leasing” means loaning your gold to someone else, usually a pre-determined period, in exchange for income. This is not a service Birch Gold Group offers. Personally, I’m not a fan of it for one big reason.

Should your borrower declare bankruptcy, you’re all too likely to become one in a long line of “unsecured creditors” squabbling over the borrower’s assets.

Gold leasing takes one of the single biggest advantages of physical precious metals ownership, total control over your assets, and throws it away! Most people don’t buy gold because they want more risk in their savings…

To me, it looks like Argentina has found a way to make its central bank gold reserve untouchable through – is it a loophole? We discuss independence of central banks a lot — is this simply enforcing the central bank’s independence? And what are the plaintiffs going to do about it? Raid the bank, John Dillinger style? Don’t hold your breath…

This story reminds us of several important points.

First is just how much power, freedom and financial independence gold bullion affords its owner.

Gold bullion can offer a degree of financial independence and security to a family who has a 1 oz American gold Eagle. And gold bullion can bail an entire nation’s economy out of major trouble (as with Russia currently, or India back in 1991).

Second, this story puts news of the numerous gold repatriation efforts we’ve seen over the past decade into perspective. In the aftermath of World Wars I and II, many European nations preferred to have their nation’s gold bullion stored in a remote place where an invading army couldn’t seize it. London and the Federal Reserve Bank of New York were favorite destinations.

More recently, this trend first stopped, then reversed. When we ask why nations are repatriating gold into their own domestic vaults, officials may say something about storage costs or protection against leasing schemes like the one Argentina signed up for.

These days, the world seems to prefer the risk of an invading army to the risk of not being able to directly control their own gold reserves.

So let’s ask the hard question:

In the event a nation defaults on a payment, should its central bank gold reserves be up for grabs?

Perhaps it’s better for everyone involved (except the luckless plaintiffs, of course) that Argentina’s gold bullion remains in the custody of Argentina’s central bank, while those of us who followed the story are reminded of a valuable lesson.

The currency problem is deeper than you might think

Alasdair Macleod recently reiterated the theme of “the mother of all asset bubbles” theme, and dispensed some valuable insights. Full segment below, keep scrolling for my analysis:

Most market participants can feel it, even if they don’t want to admit it. An economic crisis is brewing.

Gold usually goes up in times of crisis, right? We’re now in the sixth year of soaring prices while central bankers and mainstream media pretend everything is fine. That’s a lot of constant reassurances! Growth, yes, growth is preiced in

So this is a strange one both because of length and because of constant reassurances that everything is okay and risk-on markets are as well-positioned as ever. Growth is there, too, they tell us. Prices aren’t irrational – not at all – all that future growth is rationally priced in. (Stop me if you’ve heard this before.)

Well, Macleod believes it’s obvious we’re dealing with a credit crisis. One which central banks have traditionally dealt with by pushing interest rates down.

If his thesis correct, then this time is different. Because the Federal Reserve, the European Central Bank and the Bank of England – basically, the entire developed world’s central banks – have no room to maneuver. The world’s major currencies have been debased to the point that continued debasement has reached the point of diminishing returns.

Consider our situation, where the Fed has begun to cut rates despite persistent and rising inflation. Then, understand that things can only get worse elsewhere. The U.S. economy isn’t in top shape right now – even so, we blow the ailing western European economies out of the water.

Macleod expects that the pound sterling, which before the Great Financial Crisis was worth $2, held a will plunge to $1 in the near future. (During my lifetime, the mighty pound sterling fell from $2.58 each to today’s $1.22…)

Developed nations have it bad. But emerging markets have it worse – many have all but filed for bankruptcy. The Turkish lira has lost 80% of its purchasing power since January 2021!

Macleod suspects that, in the next crisis, national currencies will crumble.

Sound extreme? Let us not forget that in the Weimar Republic, and in today’s Turkey, the ruined currencies were still how the average citizen transacted. It’s just that a wheelbarrow-full was the price of a loaf of bread.

Macleod says what we’re seeing unfold in the gold market is a loss of purchasing power. To borrow his own words, central banks are engaged in “currency erosion.”

It’s not that there’s too much money in the pool driving up gold’s price. But rather that the money available in the pool no longer purchases nearly as much as it did before.

Of course, central bank history tells us the only answer to economic crisis is to crank up the money-printers. Which is why everyone seems to be fleeing to gold. “Everyone” is not an exaggeration here — according to the World Gold Council, the third quarter of 2024 saw the highest gold demand ever recorded. (We don’t yet have final numbers for the fourth quarter of 2024.)

Macleod takes the example of China. For all their talk about dedollarization, the People’s Bank of China isn’t necessarily exchanging U.S. dollars for gold. Rather they’re exchanging currency for real, intrinsically valuable, globally accepted money.

Central bankers are smart. More than anyone else, as the bureaucrats in charge of the printing presses, they realize currency is inherently worthless. Hence the multi-year central bank gold-buying boom.

How long until everyday folks realize that price of physical gold is negligible compared to the loss of purchasing power they’re constantly enduring?

Sooner rather than later, I hope, for their own sake.

This article was originally published here

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