Standard gold bars for international trade weigh 400 ounces, worth about $1.3 million.
Goldman Sachs sees gold as a far better hedge against a collapsing dollar than bitcoin.
Over the past few decades, when U.S. interest rates rose, investors would tend to sell gold and buy U.S. Treasuries, seeking higher yields.
But that long term relationship broke down in February 2022, when western financial authorities moved to freeze Russia’s central bank assets upon President Vladimir Putin’s invasion of Ukraine.
This was a wake up call, says Lina Thomas, commodity strategist at Goldman Sachs. Investors hold Treasuries or Euros because they are risk free, but if those assets can be frozen or confiscated by foreign politicians “then we have a problem.”
According to Goldman’s analysis, Russia was careful to repatriate its gold reserves held abroad.
But freezing assets is not just a problem for Russia. It damages the global system when you put in sanctions, says Thomas (speaking on a webinar hosted by energy investing consultancy Veriten).
With little faith among investors that the U.S. will be able to rein in trillion-dollar deficits, Treasury bonds are not the safe haven they used to be, so other international central bankers have decided to add to their gold piles as well.
Before 2022, central bank purchases were 17 tons per month, says Thomas. Since the Ukraine war they have grown to an average of 22 tons per month, but a remarkable 94 tons per month year-to-date.
China (the biggest gold mining country, which restricts exports) aims to grow gold holdings to 20% of reserves. Russia, the no. 2 miner and biggest exporter, has been happy to sell into the ongoing gold frenzy, though much of their supply is now routed through the likes of formerly non-gold-exporting Armenia and Kazakhstan.
The central bank gold buying binge should continue for at least another two years. That’s enough demand, figures Goldman, to drive the price up to $4,000 an ounce, a roughly 30% rise from a current $3,400.
Many central banks store their gold in Switzerland, which has vast vaulting capabilities. As the gold prices keeps rising, it becomes cheaper to store. “You can get to 20% of reserves either by increasing the volume or when the notional value goes up.”
Would this trend reverse if peace broke out? Not much, says Thomas, who did her Phd thesis at Harvard on the history of the dollar as safe haven asset. “Once you cross the Rubicon it’s a little bit tricky to come back from that,” she says. Gold allocations are likely to be sticky. It might take 20 years for macro allocators to regain enough trust to sell gold again, says Thomas.
And sell for what anyway? Bitcoin? Silver? Oil?
Daan Struyven, Goldman’s co-head of global commodities research, says the risk-reward analysis favors gold. Both bitcoin and gold are up a lot in the past three years, and the limited supply of each asset “gives confidence to investors who are worried about runaway inflation that may be caused by aggressively increasing the money supply.”
“Bitcoin is more volatile and sensitive to drawdowns, and more positively correlated with tech equities. Bitcoin and equities both do well when risk sentiment is positive,” says Struyven.
So if you want to protect against equity downside risk, “the lower correlation and lower volatility imply a pretty significant positive allocation to gold,” he says.
It’s unlikely gold miners will suddenly find big new mines; good reserves have already been depleted, going deeper takes time. Every year miners add roughly 1% to the total gold in circulation.
As for oil, Goldman sees West Texas Intermediate falling to the low $50s/bbl by mid 2026 as supply growth outpaces sluggish demand.
Why not buy silver? Thomas gives three reasons: Silver tarnishes over time, it degrades. Gold keeps its form, is far scarcer and because gold is 100 times more valuable pound-for-pound, you can move your billion dollars of buillion in a suitcase instead of the convoy of trailers you’d need for the same value of silver. Also, central banks have no interest in owning silver. It’s not recognized as a reserve asset by the IMF and is not present in any modern central bank balance sheet. Silver is more of an industrial metal, and because demand is pro-cyclical (for solar panels, electronics, etc) it is not a good hedge against economic downturn.
The gold market is just .5% of the value of the equity market, says Thomas. So even a tiny shift in allocation will have an outsized impact. For central banks the higher the price of gold goes, the easier it becomes to store — they’ll need fewer ounces to build a 20% dollar denominated allocation.
Still not sold on the barbarous relic? Just buy blue chip equities. Priced in grams of gold, the S&P 500 is down 30% since 2022 to 58 grams.
Source: https://www.forbes.com/sites/christopherhelman/2025/05/25/gold-to-top-bitcoin-and-silver-on-way-to-4k-per-oz-says-goldman-sachs/