Gold prices may have experienced sharp swings in recent weeks, but analysts at Goldman Sachs say the broader trajectory for the precious metal remains firmly upward.
In a February 12 episode of the firm’s podcast, The Markets, senior commodities analyst Lina Thomas reaffirmed Goldman’s constructive outlook on gold, forecasting prices could reach $5,400 by the end of 2026—with potential for even greater gains.
A Rally Fueled by Competition and Fear
Gold has surged across nearly every time horizon—over the past year, six months, and year-to-date—despite intermittent volatility. According to Thomas, the acceleration in 2025 reflects intensifying competition between private investors and central banks for limited bullion supplies.
Two primary forces are driving investor demand. First, anticipated interest rate cuts from the Federal Reserve have reduced the opportunity cost of holding non-yielding assets like gold. Second, mounting concerns about fiscal sustainability in several Western economies have sparked what Thomas described as a “debasement trade”—a strategy aimed at hedging against currency erosion.
Much of this positioning has been expressed through aggressive buying of gold call options, particularly on exchange-traded funds (ETFs). As prices climbed earlier this year, dealers who had sold those options were forced to buy gold to hedge their exposure, reinforcing the rally in a self-feeding cycle.
That dynamic reversed sharply at the end of January following policy announcements that eased some macroeconomic fears. As prices retreated, hedging flows flipped, accelerating the decline and triggering stop-loss selling across the market. Gold briefly fell about 15% during the pullback.
Still, Goldman maintains that the underlying demand drivers remain intact.
“Our forecast assumes that central banks continue purchasing gold at current levels and that private investors add exposure as rates decline,” Thomas said. “It does not fully account for additional diversification flows, which could provide meaningful upside.”
Silver’s Liquidity Crunch
While gold’s volatility has drawn attention, silver has experienced even more dramatic price swings, at one point dropping nearly 35%.
Thomas attributed silver’s turbulence to a growing liquidity squeeze in London, the global hub for precious metals trading. Roughly half of the silver stored in London vaults is already allocated to specific owners, leaving the remainder as a liquidity buffer.
In 2025, much of that buffer was shipped to the United States amid concerns about potential tariffs, shrinking available supply in London. At the same time, investor enthusiasm for silver surged, fueled by expectations of Fed rate cuts and spillover demand from gold.
The combination of strong demand and limited liquidity has created extreme price sensitivity. When buying intensifies, prices spike sharply as inventories approach what Thomas called the “bottom of the vault.” Conversely, even modest pullbacks can trigger steep declines as liquidity temporarily improves.
Goldman does not expect liquidity conditions in silver to normalize soon, suggesting that heightened volatility may persist.
Commodity Insurance, But Not a Supercycle
The rally in gold has coincided with gains in other commodities, including copper, raising questions about whether markets are entering a new commodity supercycle.
Thomas sees similarities—but also key differences.
She noted that the same “insurance demand” driving central bank gold purchases is emerging across commodity markets more broadly. Governments are stockpiling critical materials, implementing tariffs and export controls, and supporting domestic supply chains, contributing to fragmentation and volatility.
However, she stopped short of predicting a sustained supercycle. Unlike industrial commodities, gold production cannot be rapidly scaled in response to higher prices. Copper and other metals, by contrast, can eventually attract new supply, which may cap longer-term price increases.
“Gold is structurally constrained,” Thomas explained. “Other commodities will ultimately see supply respond to higher prices.”
Gold Preferred Over Silver
Despite the potential for outsized silver gains, Goldman’s conviction remains stronger in gold. Central bank demand provides a structural bid, and institutional investors continue to view gold as a core portfolio diversifier.
Silver’s liquidity-driven swings, while potentially lucrative, may prove too volatile for many investors.
Looking ahead, Goldman’s analysts will monitor central bank purchasing trends and the buildup of gold call options—both of which have amplified price movements in recent months.
For now, even amid turbulence, the firm’s message is clear: gold’s rally may be volatile, but the bullish case remains intact.
