Wall Street giant Goldman Sachs predicted that gold prices could soar to the $5,000 mark on fears that President Trump is trying to clamp down on the Federal Reserve’s independence.
The precious metal has rallied 35% this year to more than $3,500 per troy ounce, making it one of the world’s best-performing major assets. Gold is traditionally seen as a hedge against inflation.
“A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock and long-dated bond prices, and an erosion of the dollar’s reserve-currency status,” Goldman Sachs analysts including Samantha Dart said in a note.
“In contrast, gold is a store of value that doesn’t rely on institutional trust,” the note added. “Gold remains our highest-conviction long recommendation in the commodities space.”
The paper is the David Solomon-led lender’s latest dig at Trumponomics. The president went on a furious Truth Social tirade last month and called for Jan Hatzius, the bank’s chief economist, to be fired after he predicted consumers would end up picking up the tab for the tariffs that the White House has slapped on imported goods.
“I think that David should go out and get himself a new Economist or, maybe, he ought to just focus on being a DJ, and not bother running a major Financial Institution,” the president wrote.
However, the price of shares in the top bank have surged by more than 50% over the past year, and stood at $740.73 in afternoon trading on Thursday.
Goldman’s view was also echoed by economists at the BlackRock Investment Institute who warned that markets “can no longer rely on longer-term US Treasuries to offer protection during equity selloffs.”
“Gold has surged as investors seek other ways to build resilient portfolios; indeed, foreign central banks now hold more gold than US Treasuries,” the Sept 2. paper said. “Investors must find new sources of resilience as diversifiers grow scarcer.”
The price rise of the precious metal appears to indicate that markets are indeed concerned about the political uncertainty that surrounds the future makeup of the Federal Reserve.
It follows a months-long spat between Trump and Chair Jerome Powell over whether to slash interest rates now.
The pair have clashed over the costly overruns of the Fed’s $2.5B downtown DC HQ, as well as the allegations of mortgage fraud surrounding Governor Lisa Cook. The DOJ announced earlier on Thursday that it was opening a probe into the Joe Biden-era appointee.
But critics of the president claim he is trying to oust members of the Federal Reserve Board who are refusing to cut the key borrowing rate immediately.
Fed Governor Christopher Waller on Wednesday repeated his call for an interest-rate cut in September given the weakening in the labor market.
“I think we need to start cutting rates at the next meeting, and then we don’t have to go in a locked sequence of steps,” Waller said in an interview on CNBC
