Goldman’s framing keeps the structural bull case for gold intact even after a sharp pullback from January’s peak, with the bank treating any dip toward $4,000 an ounce as a buying opportunity rather than a trend change. The read-through for positioning is that scaling into longs on weakness into the September FOMC is the preferred approach, with this week’s CPI print (Goldman economists say this is critical) seen as the key near-term catalyst for how the Fed’s reaction function gets priced.
Central bank accumulation, which Goldman frames as running at roughly double its pre-2022 pace, is the flow least likely to reverse even if retail and ETF demand stays subdued. Silver, by contrast, is flagged as the higher-beta, more retail-driven play, with a far wider range of potential outcomes.
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Goldman’s message on gold is simple: this is a pause built on Fed uncertainty and disrupted reserve flows, not the top.
Summary:
- Tony Kim, Goldman Sachs global head of metals trading, spoke on the bank’s markets podcast last week
- Gold is around 20% off its January peak despite a strong August, which Kim frames as an elongated pause rather than a cycle top
- Two factors driving the pause: uncertainty over incoming Fed chair Warsh’s policy tilt, and US-Iran conflict disruption to energy, agriculture and metals markets
- Central banks are now buying an estimated 1,000 to 1,100 tonnes of gold annually, roughly double the 400 to 500 tonnes bought before the Russia-Ukraine conflict, out of around 3,500 tonnes mined each year
- Asian physical demand has been challenged by the Iran conflict, with countries like India prioritising currency defence for energy security over gold accumulation
- Goldman sees $4,000 an ounce as a solid floor for scaling into long positions, with next week’s CPI print as the key catalyst ahead of the September FOMC
Goldman Sachs is telling clients that gold’s retreat from January’s record highs is a pause in the bull market rather than its conclusion, according to comments from Tony Kim, the bank’s global head of metals trading within fixed income, currencies and commodities. Kim said gold remains around 20% below its January peak despite a strong August, but argued the structural drivers of the rally are still in place.
Kim pointed to two overlapping factors behind the current pause. The first is uncertainty around incoming Federal Reserve chair Kevin Warsh and how his policy reaction function will take shape within the context of the Trump administration’s public commentary on Fed policy. The second is the fallout from the US-Iran conflict, which has disrupted energy, agriculture and metals markets in ways that affect not only inflation expectations but also the reserve accumulation that historically recycles into precious metals. Positioning across large parts of Goldman’s client franchise has been pared back as a result, though central bank buying has remained the one flow that has held up.
That central bank demand is doing much of the structural heavy lifting, according to Kim. Global mine supply runs at roughly 3,500 tonnes of gold a year, and central banks, which bought 400 to 500 tonnes annually before the confiscation of Russian reserves following the Russia-Ukraine conflict, are now purchasing closer to 1,000 to 1,100 tonnes a year. That leaves a smaller pool of supply available for jewellery, ETFs and physical investment, meaning less new investment capital is needed to move prices materially higher.
Asian demand, traditionally a major pillar for both jewellery and central bank buying, has been a weaker link this year. Kim said the Iran conflict has disrupted reserve generation in the region, while countries such as India have prioritised defending their currencies to secure energy supplies over accumulating gold, with some domestic policies actively restricting gold demand. A durable return of that flow, he said, likely depends on a longer-term normalisation of Middle East energy markets.
On silver, Kim was more circumspect, noting that with investment demand making up only around a fifth of the market’s demand base against a heavier industrial component, the metal’s clearing price could plausibly sit anywhere between $50 and $100 an ounce depending on how retail, physical and investment flows align. He noted central banks are not accumulating silver the way they are gold, making it a higher-beta, more retail-driven bet rather than the fundamental trade.
Goldman’s institutional view remains bullish on gold, with Kim identifying $4,000 an ounce as a level where sovereign and institutional buying provide solid support, and recommending clients use volatility around incoming data, including this week’s CPI print, to scale into long positions ahead of the September Federal Reserve meeting.
This article was written by Eamonn Sheridan at investinglive.com.