Gold Eyes New Highs Amid Market Uncertainty: Crisis Brewing or Speculation Driven by Trump and the Fed? Goldman Sachs Weighs In.
The link between a financial crisis and gold is inextricable, with the precious metal consistently serving as a direct reflection of economic turmoil.
It is no coincidence that gold prices have surged to new all-time highs, reaching $2,874 per ounce following the wave of sell-offs that hit U.S. technology stocks last Monday—particularly Nvidia, which lost 17% in a single session.
Many are now questioning whether the launch of a new free and open-source large-scale language model (LLM) by Chinese AI startup DeepSeek could spark a speculative bubble in the AI sector. ù
However, market instability is not the only factor driving renewed interest in gold: according to Goldman Sachs, multiple forces are contributing to its rise.
1) Tariffs on Raw Materials
The imposition of 25% tariffs on imports from Mexico and Canada is raising investor concerns, pushing up gold prices, which are traditionally seen as a safe-haven asset in times of economic and political uncertainty.
The protectionist policies of the new Trump administration are considered inflationary and could trigger trade wars, further increasing demand for safe-haven assets like gold.
The evidence? Since the end of November, gold reserves at COMEX in New York have surged by 73.5% to 30.4 million ounces—the highest level since July 2022—while inventories in the London market have declined.
According to Goldman Sachs, Trump’s tariffs could drive gold prices up to $3,150 per ounce, despite the dollar’s continued strength amid inflation-driven support.
2) Budget Deficit
Goldman Sachs also highlights a direct link between the U.S. budget deficit and gold.
The exponential increase in U.S. debt is raising concerns among investors and analysts about long-term debt sustainability, positioning gold as a potential hedge against sovereign risk.
Notably, the U.S. budget deficit reached $1.83 trillion in the last fiscal year and was financed through new borrowing.
However, if the Federal Reserve were forced to purchase more Treasuries with newly issued dollars, the resulting inflationary pressure could push central banks holding significant U.S. Treasury reserves to increase their gold purchases.
The investment bank also notes that structural demand for gold from emerging-market central banks has grown since the summer, supported by the Chinese real estate market crisis.
This trend suggests that Chinese demand for gold will remain strong, as alternative investment opportunities remain limited.
3) Fed Rates
A final key factor supporting gold prices is the Federal Reserve.
According to Goldman Sachs, lower interest rates reduce the opportunity cost of holding gold—an asset that generates no yield—making it more attractive relative to bonds and savings accounts.
Exchange-traded funds (ETFs) are expected to drive gold prices higher as investors seek portfolio protection against the anticipated Fed rate cuts, projected to fall within the 4.00% to 4.25% range by June 2025.
While the Fed has currently paused rate cuts, the prospect of a more accommodative monetary policy could weaken the dollar, further boosting gold demand as it becomes cheaper for international investors.
Original article published on Money.it Italy 2025-02-05 07:25:00. Original title: Crisi finanziaria e oro. Ecco perché Goldman Sachs prevede nuovi record oltre 3.000$
