Goldman Sachs interprets "Gold Price Breakthrough": Western investors significantly increase positions, and gold price gains may exceed expectations

Goldman Sachs, which is bullish on gold in the long term, stated that the rise in gold prices may be far from over, driven by an unexpected surge in holdings by Western individual investors.

According to the news from the Wind Trading Desk, Goldman Sachs analysts Daan Struyven, Lina Thomas, and Alexandra Paulus recently stated in a research report that the recent inflow of funds into gold ETFs far exceeds model expectations, indicating that the trend of individual investors shifting funds from traditional assets like fixed income to gold may be becoming a reality, and this movement is seen as a key "huge risk" for the upward trend in gold prices.

Since late August, gold prices have risen more than 10%, strongly breaking through the trading range of the second and third quarters. The report noted that the main driving force behind this round of increase comes from "committed" buyers rather than speculative short-term funds, which enhances the sustainability of this upward trend.

The bank reiterated that gold remains its "highest conviction" recommendation for going long on commodities. Goldman Sachs previously estimated that if only 1% of the privately held U.S. Treasury funds were shifted to gold, the price of gold could theoretically rise to nearly $5,000 per ounce, and this scenario is becoming more realistically possible due to changes in investor behavior.

Unexpected Inflow of ETF Funds Mainly from Private Investors

Goldman Sachs emphasized in the report that one of the key driving forces behind the recent breakthrough in gold prices is the strong demand from Western investors for gold ETFs.

Goldman Sachs' analytical framework categorizes gold buyers into three types: Western ETF investors, central banks, and speculators, and the recent rise in gold prices mainly reflects that "committed" individual buyers are increasing their purchasing efforts.

The report shows that the inflow of funds into gold ETFs reached 109 tons in September, while the bank's model predicted an inflow of only 17 tons based on interest rate trends. Among these, speculative positions can only explain about 1 percentage point of the increase over the past month, and have not increased in the last three weeks.

This "huge surprise" indicates that the potential upside risk that Goldman Sachs has been warning about—namely, that individual investors will allocate a large amount of funds to gold—is "currently seeming to become a reality."

The report further pointed out that in the approximately 14% increase in gold prices since August 26, the growth in Western ETF holdings contributed 3 percentage points.

Goldman Sachs believes that although the central bank's gold purchase data for September has not yet been released, considering the seasonal pattern of central bank gold purchases, demand from central banks may accelerate again after the calm summer period. Goldman Sachs suspects that central bank purchases have accounted for a significant share of the recent increase.

Gold Prices May Have Greater Imagination Space

Goldman Sachs believes that its baseline forecast for gold prices is facing increasing upside risks.

The reasons for the heightened risks are twofold: first, the speculative component of this round of increase is very low, indicating a more solid foundation for the rise. Second, due to the relatively small size of the gold market (for example, the total value of Western gold ETFs is only about 1.5% of the privately held U.S. Treasury size), even a relatively small diversification shift in developed market fixed income assets could drive gold prices into the next round of significant increases Goldman Sachs summarized that gold has multiple attractions. In addition to the benefits of asset diversification for the private sector, in scenarios of "tail risks" unfavorable to traditional stock and bond portfolios, such as slowing economic growth and increasing market concerns about macro policies in developed economies, gold can provide a highly attractive portfolio hedging function.

The bank predicts that gold prices will reach $4,000 per ounce by mid-2026 and $4,300 per ounce by the end of 2026.