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Gold’s skyrocketing rise this year is based on strong demand fundamentals, not hype, a Goldman Sachs analyst said.
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Central banks and private investors are accumulating gold amid the Federal Reserve’s rate cuts.
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The 1970s may hold lessons for gold’s future, the Goldman Sachs analyst said.
Gold prices have soared this year, but the rally remains rooted in real demand, not hype, and there could still be room to rise, according to Goldman Sachs.
Gold, a safe-haven asset, is up around 65% in 2025, putting it on track for its biggest rally since 1979, thanks to a combination of economic and geopolitical fears.
On Thursday, the yellow metal hit an all-time high for the fourth consecutive session, topping $4,300 an ounce, according to LSEG data.
While the eye-catching gains have raised concerns about speculation, Goldman Sachs research analyst Lina Thomas said in a video Thursday that “the rally remains grounded in fundamentals, not frenzy” for now.
“Actually, the move is not that unusual. Central banks are still buying record amounts of gold, and private investors are simply playing catch-up as the Federal Reserve cuts rates,” Thomas said.
“So after years of underallocation, this is more of a normalization than a mania,” he added.
Earlier this month, Goldman Sachs raised its December 2026 gold forecast to $4,900 per ounce from $4,300, citing strong inflows into Western gold ETFs and demand from central banks.
However, Thomas said there could still be a “significant upside” in the future, citing the gold rush of the 1970s as a historical parallel.
In the 1970s, gold prices soared following President Richard Nixon’s decision to end the Bretton Woods fixed exchange rate monetary system, which had pegged the dollar to gold.
Once the yellow metal floated freely, the price rose dramatically due to market volatility, driven by rising inflation, the oil crisis, and geopolitical fears linked to the Vietnam War and the Cold War.
“Back then, fiscal concerns and political uncertainty led private investors to look for a store of value outside the system,” Thomas said.
“If those fears were to resurface, we could see the global trend toward diversification intensify,” he said.
This is particularly because the gold market is small compared to Treasuries or stocks, meaning prices can move quickly.
Billionaire investor Ray Dalio has drawn similar parallels.
Speaking at an economic forum earlier this month, the founder of Bridgewater Associates said the rising gold price along with the stock market rally now reflects the situation of the 1970s.