Goldman Sachs warns: If the Federal Reserve's credibility is damaged, gold could soar to nearly $5,000.

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Goldman Sachs' latest warning states that if the Federal Reserve's credibility is damaged, it would only take a very small shift of investors' U.S. Treasury holdings into gold for the gold price to potentially soar to a staggering level near $5,000 per ounce.

On Thursday, a team of Goldman Sachs analysts said in their latest report that in the scenario where the Federal Reserve's independence is undermined, the market could face multiple shocks, including rising inflation, falling stocks and bonds, and a weakening of the U.S. dollar's reserve currency status. In contrast, gold, as a store of value that does not rely on institutional trust, will become a safe haven for investors.

In the report, Goldman proposed three gold price scenarios: the baseline forecast is a rise to $4,000 by mid-2026, a tail risk scenario reaching $4,500, while in an extreme case, if just 1% of privately held U.S. Treasury funds flow into the gold market, the price of gold would approach the $5,000 mark.

So far this year, gold has become one of the best performing major commodities, rising more than 30% and hitting a record high earlier this week. Factors driving this rally include central bank purchases, expectations for Fed rate cuts, and Trump applying more control over the Fed.

Recently, Trump has attempted to strengthen control over the Federal Reserve, including pushing to remove board member Lisa Cook, a move that has triggered market concerns about the central bank's independence. European Central Bank President Lagarde warned that the Fed losing its independence would pose a “serious danger” to the world.

Risks to Fed Independence Cause Market Concern

In the report titled “Diversified Commodity Investment, Especially in Gold,” Goldman Sachs analyzed in detail the mechanism that could push gold prices to $5,000. The analyst team, including Samantha Dart, estimated that “if only 1% of funds from privately held U.S. Treasuries flow into gold, all else being equal, the gold price would rise to near $5,000 per ounce.”

The investment bank describes gold as “a store of value not reliant on institutional trust,” a feature that becomes especially important when central bank independence is in question. The report notes that damage to Fed independence would trigger a chain reaction, including rising inflation expectations, decreased attractiveness of traditional financial assets, and a potential shakeup of the U.S. dollar’s international status.

Goldman Sachs therefore maintains gold as its “highest conviction long recommendation” in the commodities space. The bank believes that even under the baseline scenario, the gold price is likely to see significant gains over the next two years.

Specifically, Goldman Sachs sets three different gold price targets. Under the baseline scenario, gold will reach $4,000 per ounce by mid-2026. This forecast is based on a continuation of the current market environment and policy trends.

In the tail risk scenario, gold could rise to $4,500 per ounce. This scenario takes into account more uncertainty and potential market shocks.

The most extreme scenario is that if only 1% of funds from privately held U.S. Treasuries flow into the gold market, all else being equal, the gold price would soar to almost $5,000 per ounce.

Risk Disclaimer and Liability ClausesThe market involves risks, and investments must be made with caution. This article does not constitute personal investment advice, nor does it consider individual users' special investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their specific circumstances. You are solely responsible for any investment based on this information. ```