Goldman Sachs told clients that gold’s pullback after hitting record highs in January is more of a cyclical correction within a bull market rather than an end to the rally.
Tony Kim, Global Head of Metals Trading for the Fixed‑Income, Currencies & Commodities division at the bank, stated that despite gold’s strong performance in August, prices remain roughly 20% below January’s peak, and the structural drivers lifting gold prices are still intact.
Kim pointed out that two major factors are driving the current consolidation phase in the gold market.
First, markets are awaiting the policy stance of incoming Fed Chair Kevin Warsh and how he will adjust the monetary‑policy response framework amid public pressure on the Federal Reserve from the Trump administration.
Second, spill‑over effects stemming from the US‑Iran conflict are roiling energy, agricultural and metals markets. This affects not only inflation expectations but also the accumulation of global reserve capital, capital that has historically flowed into precious‑metal markets. As a result, gold positioning among Goldman Sachs clients has declined, yet central‑bank purchases remain the only steady capital flow at present.
Kim said central‑bank demand is providing vital support for the gold market.
Global gold mine output stands at roughly 3,500 tonnes per year. Before Russia’s foreign‑exchange reserves were frozen following the Russia‑Ukraine conflict, annual gold purchases by central banks stood at about 400‑500 tonnes. Today that figure has climbed to approximately 1,000‑1,100 tonnes.
This means the pool of new supply available for jewellery consumption, gold ETFs and retail physical investment is shrinking, so less fresh capital is required to push gold prices higher.
ASIan demand has long been a key pillar for gold‑jewellery consumption and central‑bank gold purchases, yet it has remained relatively soft this year.
Kim explained that the Iran conflict has disrupted foreign‑reserve accumulation across parts of ASIa. Countries such as India are prioritising domestic‑currency stability to secure energy imports instead of expanding gold reserves. Domestic policies have also weighed on gold demand.
He believes a genuine recovery in ASIan gold demand will likely require long‑term stabilisation in Middle‑Eastern energy markets.
Goldman Sachs takes a more cautious stance on the silver market.
Kim noted that investment demand accounts for only around one‑fifth of total silver demand while industrial demand makes up a larger share. Accordingly, silver can trade across a broad fair‑value range from $50 to $100 per ounce, depending on retail investment, physical consumption and financial‑capital flows.
He stressed that unlike gold, central banks have not built up large‑scale silver positions. Silver is therefore a high‑volatility, high‑beta investment vehicle driven largely by retail and market capital rather than structural central‑bank buying.
Even so, Goldman Sachs’ institutional view remains bullish on gold.
Kim stated that $4,000 per ounce is a critical price level where buying interest from sovereign institutions and large‑scale investors is expected to deliver solid support.
Goldman Sachs advises clients to take advantage of market volatility triggered by upcoming economic data releases, such as price swings following this week’s US CPI print, to gradually build long gold positions in preparation for the September Fed meeting.