Goldman Sachs Sees Pause in Gold Market, Not End to Bull Run
Goldman Sachs' global head of metals trading, Tony Kim, has reassured clients that the gold market's retreat from January's record highs is a pause rather than the end of its bull run. According to Kim, the current price slump is driven by uncertainty over incoming Federal Reserve Chair Kevin Warsh's policy tilt and the disruption caused by the US-Iran conflict to energy, agriculture, and metals markets.
The bank's analysts point out that central banks are buying gold at a rate roughly double what it was before the Russia-Ukraine conflict, with an estimated 1,000 to 1,100 tonnes purchased annually. This is significantly higher than the pre-conflict rate of 400 to 500 tonnes per year.
Kim notes that Asian physical demand has been weakened by the Iran conflict, as countries like India prioritize currency defense for energy security over gold accumulation. However, Goldman sees $4,000 an ounce as a solid floor for scaling into long positions, with next week's CPI print being the key catalyst ahead of the September FOMC meeting.
The bank also cautions that silver is a higher-beta, more retail-driven play, with a wider range of potential outcomes due to its smaller investment demand component.