Tariff concerns drive gold to a historic high, Goldman Sachs predicts gold prices may rise to $3,000

The current price of gold reached $2,885 per ounce on Friday, setting a new historical high.

Financial blog ZeroHedge reported that tariff concerns have driven market positioning levels to the 91st percentile since 2014, consistent with Goldman Sachs' estimate that tariff hedging has pushed gold prices up by 7%.

Goldman Sachs' commodity research team stated in their latest report that if tariff uncertainty dissipates and market positioning returns to normal, gold prices may experience a moderate tactical pullback.

Although Goldman Sachs' baseline forecast is for gold prices to gradually adjust before the second quarter of 2026, if speculative positioning quickly returns to the long-term average, gold prices could fall to $2,650 per ounce (a 7% decline).

Meanwhile, central banks continue to purchase gold (expected to drive gold prices up by 11% until Q2 2026), along with a gradual increase in ETF holdings (expected to bring a 4% increase during the same period), coupled with interest rate cuts from the Federal Reserve, which continue to support Goldman Sachs' target of $3,000 per ounce for gold by Q2 2026.

However, ZeroHedge analysis suggests that deep-seated issues in the precious metals market are worsening. Regarding the price spread between New York COMEX futures prices and London spot gold prices (Exchange-for-Physical, abbreviated as EFP), if COMEX futures prices are higher than London spot gold prices, arbitrage traders will buy cheaper gold in London, melt 400-ounce bars into 100-ounce bars, and then transport them to New York via commercial flights for delivery on COMEX to profit. This type of arbitrage trading typically keeps gold prices in New York and London synchronized.

However, due to market concerns about a 10% tariff on gold imports by the U.S., the EFP has recently widened significantly. First, transporting gold to the U.S. incurs costs, such as refining it through Switzerland to meet COMEX delivery standards, which affects arbitrage profits. If the U.S. imposes a 10% tariff on all gold imports, transporting gold to the U.S. will become more expensive, and arbitrage trading may no longer be profitable.

Due to this expectation, traders have begun transferring gold to the U.S., leading to a shortage of gold in London and soaring gold leasing rates Currently, the one-month gold leasing rate (a key indicator of physical demand) has reached a historic high, as market traders scramble to lock in physical gold to profit from the EFP price spread.

This has led to a 64% surge in COMEX exchange inventories (USD 37 billion), as traders are delivering physical gold to hedge COMEX shorts.

If U.S. tariffs take effect, ZeroHedge analysis suggests that the price spread (EFP) between COMEX and London gold prices could spike to nearly 10% in the short term, before eventually retreating to a range of 0-10%, depending on supply and demand conditions in London and the U.S. market.

Although Goldman Sachs' baseline forecast indicates that precious metals will not be subject to tariffs (but they expect industrial metals to be taxed), the tariff risk premium will continue to exist on the EFP curve.

At the same time, the silver market is experiencing a similar situation, with the one-month leasing rate reaching a historic high, leading to an inverted forward curve (despite SOFR rates exceeding 4%).

Moreover, traders are scrambling to buy silver to take advantage of arbitrage opportunities.

Ronan Manly from Bullion Brief points out that the market is at a critical moment:

The London Precious Metals Clearing Limited (LPMCL) has exhausted its deliverable gold in its vaults, and is attempting to borrow gold through the Bank of England's gold lending market, but this route is also becoming unviable.

These clearing banks (JP Morgan, HSBC, UBS, and CITIC Standard Bank) need to maintain a certain amount of London gold reserves to ensure liquidity, but it currently appears they do not have enough gold to do so.

Counterparty risk among members of the London Bullion Market Association (LBMA) is rising, including market makers, clearing institutions, and about 50 other dealers and brokers.

What is being traded in the market is "gold debt" (i.e., electronic gold notes), which are currently being traded at a discount because they cannot be redeemed for physical gold at any time.

The borrowing rate (shorting cost) for GLD (the world's largest gold ETF) surged from 2.44% to 6.29% within hours, highlighting market panic

Manly warns:

“This means the market is in complete panic... The London market has no gold support!”

Despite this, Goldman Sachs still maintains its target of $3,000 per ounce for gold in Q2 2026.

Goldman Sachs believes that the ongoing uncertainty in U.S. policy may long-term drive the demand for safe-haven assets from central banks and investors, which brings upward risk to the $3,000 per ounce gold price target.

Although the current market position levels are high, making the entry point for short-term investors less attractive, Goldman Sachs still recommends holding gold for the long term and continues to advocate long-term gold trading strategies, especially for investors seeking to hedge against U.S. policy risks.