(Kitco News) – The gold market’s relative underperformance since February is not a failure of the bull market, but merely a pause, and the yellow metal has fresh all-time highs in its medium-term future, according to Anthony Kim, Global Head of Metals Trading at Goldman Sachs.
Kim was asked on Goldman’s The Markets podcast whether gold’s all-time high of $5,589.38 per ounce in late January was the top of the current cycle.
“From our perspective, this isn't the end of the bull market,” he said. “It's an elongated pause.”
As to why the pause has lasted over seven months, Kim pointed to the interplay of two key factors.
“Number one is the nomination of Warsh and the ultimate confirmation of him as the new Fed chair,” he said. “I think the market's trying to understand what his reaction function and policy tilt is going to be, especially within the context of the Trump administration and a lot of the headlines surrounding Trump's view of Fed policy.”
The other factor is the Iran conflict, and how it has impacted global gold reserve accumulation as energy markets have been disrupted.
“A lot of those reserves that would historically recycle some amount into precious metals markets has certainly been disturbed,” Kim pointed out. “We've seen a huge reduction of positioning across large amounts of our franchise.”
“The one flow that does remain […] is the central bank accumulation,” he added. “But high-level, we think it's a pause, and ultimately the bull trend will resume and new highs are going to be in the future.”
Kim was asked how much of a role opportunity cost is playing in the current market, and whether high yields will continue to cap the yellow metal’s potential upside.
“There's been a cheapening of fiat currency versus gold, that's been a trend that we've been in for now several years,” he said. “If fiscal sustainability becomes the real driver of whether people want to allocate into gold – and fiscal sustainability is a concern not just in the West, but in Japan – then you might actually start to see the correlations break down a little bit. In other words, higher backend bond yields because of concerns about the fiscal situation could lead to allocations going into gold.”
“Locally, we do think these rates and gold correlations will hold, but the longer-term trajectory is certainly being called into question,” he added.
Kim pointed to the recent policy changes on the part of the U.S. government as major drivers of this narrative.
“If you look at the intervention into currency markets, in particular with dollar-yen, as well as the U.S. Treasury repurchasing larger amounts of the long end of the curve and trying to potentially change the dynamics of the yield markets, I think any time you see official policy intervention, people tend to buy gold,” he said. “Over the last month, we've had a very active client franchise despite the fact that we've been in the summer, post the July FOMC, then with these policy interventions, and then post Jackson Hole. A lot of clients are looking at expressions to put on some sort of convexity plays, and tweaking them as the data roll in terms of how they want to position themselves.”
“The challenge always is going to be not only the reaction function, but the data itself.”
Kim said he’ll be very focused on the August CPI data, which will be the last meaningful measure of inflation before the Fed’s September rate decision.
“What I'm really curious about is there are a lot of different moving pieces,” he said. “What’s the market's reaction function to the print? In other words, is it going to try and predict that the Fed is going to for sure hike in September, and flatten the curve? Are you actually going to see some uncertainty about what the Fed's reaction function would be?”
“Depending on how the market is interpreting the data, we'll get a better sense of which way gold's going to be leaning.”
“We're still bullish gold,” Kim said. “I think the challenge here is post Jackson Hole, we need some data to come out and obviously wait to see what the Fed does. But in terms of a level that we like, $4,000 is a pretty solid floor. We see sovereign buying at those levels. We see institutional sponsorship at those levels.”
“If you get a chance to scale in between now and the FOMC with some of the volatility around the data, closer to $4,000, you want to scale into a long position there.”
On Sept. 2, analysts at Goldman Sachs Research said gold prices will rise to $4,900 per ounce by the end of 2026 amid strong demand from central banks seeking to diversify their foreign currency reserves, while investors using gold derivatives to hedge may be making the yellow metal more volatile.
“Gold is projected to extend its recent gains in the second half of 2026, even as growing use of some derivatives tied to the metal could be making gold prices more volatile,” wrote Lina Thomas and Daan Struyven at Goldman Sachs Research.
The firm forecasts the precious metal’s price will rise to $4,900 per ounce by the end of the year as central banks continue diversifying their reserves and markets scale back expectations for U.S. rate hikes in 2026.
The analysts see central bank demand as a key structural factor underpinning gold’s rally.
“We continue to see elevated central bank gold accumulation as a multi-year trend, as central banks diversify their reserves to hedge geopolitical and financial risks, consistent with recent survey evidence,” Thomas and Struyven said.
Goldman Sachs Research forecasts central banks will buy an average of 50 tonnes of gold per month in 2026, up from an average of 17 tonnes per month in the years before 2022.
According to Goldman Sachs Research’s nowcast of central bank activity, sovereign purchases accelerated to 100 tonnes per month in June 2026 on a three-month seasonally adjusted basis, up from 66 tonnes the previous month, with China’s central bank the largest confirmed buyer in June.
Another key factor driving the recent gold price increase was interest rate expectations. “Demand from some investors is starting to recover from a slow first half of the year as markets scale back expectations of a Federal Reserve rate hike in 2026,” the report said.
“We expect the Fed-related headwind to abate further, as our economists expect a lower inflation trend to keep the Fed on hold this year,” the analysts wrote.
They also highlighted a number of medium-term factors that could drive the gold price above their 2026 forecast of $4,900. “Gold’s share in private portfolios remains low, and recent geopolitical developments—including Iran and broader tensions—may accelerate diversification beyond central banks to private investors, including by weighing on perceptions of Western fiscal sustainability,” the analysts said.
Thomas and Struyven explained that demand for gold call options is on the rise as investors use them to hedge their portfolios against large-scale changes in government policies – and this has the potential to amplify price swings in both directions.
“As gold rises, it is approaching key strike levels for some call options, forcing options dealers that sold these calls to buy gold in order to hedge their short exposure to the metal, accelerating the rally,” the report noted. “On the other hand, declines in the gold price could prompt dealers to reverse those hedges by selling their gold holdings, driving prices even lower.”
Goldman Sachs Research’s $4,900 forecast for 2026 does not take into account this elevated demand for hedges through gold derivatives, which increases the upside risk to their forecast, but also implies “greater two-sided volatility” to the gold rally.
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