Goldman Sachs suddenly increases bets: gold price target soars by $500, central banks are competing for physical gold

Goldman Sachs significantly raised its year-end gold price forecast today, from previously $4,900 to $5,400, an increase of about 10%. This is not just a numerical adjustment; it reflects profound changes in the global asset allocation landscape: central banks, private investors, and hedge funds are working together to push up precious metal prices, while tight supply conditions provide the perfect soil for this “competition.”

Central Banks Changing the Game: From Traditional Reserves to ETF Investments

Goldman Sachs analyst Daan Struyven made a key observation in the report: central banks worldwide have begun competing with private sector investors for limited physical gold supplies through traditional ETF investment methods.

This shift is far more significant than it appears. Central bank gold purchases are no longer just strategic reserves but have become active participants in financial markets. According to Goldman Sachs’ forecast, central banks will buy 60 tons of gold each month this year, forming a sustained and massive demand base.

Why are central banks suddenly so active?

The Fed’s rate-cut cycle has become the mainstream expectation. When interest rates decline, the opportunity cost of holding gold decreases, and gold’s appeal as a non-yielding asset rises. Meanwhile, rising global geopolitical risks and increasing debt pressures make gold an essential final credit hedge, becoming a must-have for central banks.

Diversification of Private Investors

Goldman Sachs assumes that private sector diversified investors will continue holding gold, and their purchasing behavior is sufficient to offset global policy risks. This means that by 2026, large funds will not sell their gold holdings due to short-term fluctuations, which effectively raises the starting point for price forecasts.

ETF holdings data confirm this. The world’s largest gold ETF has recently accumulated over 23 tons, with institutional allocation enthusiasm remaining high.

Supply Side Concerns: Signs of Liquidity Exhaustion

The Goldman Sachs report also points out that London vault inventories are at unusually low levels, and Asia is restricting silver exports. These signals all point to the same conclusion: physical supplies of precious metals are tightening.

When demand from central banks, ETFs, and hedge funds advances simultaneously, while supply is constrained, the logic for rising prices becomes irreversible. This is akin to the “bank run” logic on on-chain assets—liquidity exhaustion often leads to violent price surges.

Data Benchmarking: Multi-Dimensional Validation of Gold Price Targets

It is worth noting that current gold prices are already close to $4,900 (data as of January 21), leaving about 10% room to reach Goldman Sachs’ new target of $5,400. Goldman’s forecast is for the end of the year, implying an approximately 11-month run.

The Full Picture of Precious Metal Hedging Demand: Silver Also on the Move

Meanwhile, silver prices have broken through $94 to hit a new all-time high. This is no coincidence. When central banks and institutional funds start allocating to precious metals, the entire sector benefits.

Gold represents the ultimate credit hedge, while silver, due to tighter inventories, industrial uses (photovoltaics, chip manufacturing), and safe-haven attributes, has become a “high beta” hedging tool. Its high volatility, small market cap, and strong demand often trigger more dramatic price reactions during rising risk environments.

Summary

Goldman Sachs’ upward revision is not an isolated forecast upgrade but a confirmation of the broader global asset allocation trend. Central banks have changed their gold acquisition methods, shifting from passive reserves to active investors; the Fed’s rate-cut cycle has eliminated interest rate resistance to gold price rises; and tight supply provides price support. The resonance of these three factors makes the move from $4,900 to $5,400 both logically justified and time-supported.

For the market, the key is not whether gold can reach $5,400, but to recognize the macro logic behind it: against the backdrop of rising global liquidity and policy uncertainty, safe-haven demand for hard assets has become a consensus, and the long-term upward trend of precious metals has been established.