Goldman Sachs Sees Bullish Gold Market Amid Uncertainty

Gold prices may have paused recently but Goldman Sachs remains bullish on the metal's prospects. According to Tony Kim, global head of metals trading at Goldman Sachs, the current weakness is an 'elongated pause' rather than the end of the broader bull market.

The recent increase in Treasury yields and the US dollar has put pressure on gold, while stronger-than-expected US jobs data on September 4 increased expectations for a Federal Reserve interest rate hike. However, Kim believes that once market uncertainty clears, gold could set records.

Kim suggests that investors looking to enter the market should consider building positions gradually rather than trying to identify the exact bottom. He notes that gold's price has a 'pretty solid floor' of 4,000 and advises scaling in between now and the FOMC meeting with some volatility around data.

The biggest reason for Goldman Sachs' optimism is the dramatic increase in central-bank gold purchases since the Russia-Ukraine war. Central banks have increased their buying from around 400 to 500 tonnes annually before the war to closer to 1,000 to 1,100 tonnes now.