Gold could hit nearly $5,000 if Trump undermines Fed, says Goldman Sachs

Goldman Sachs has made the bold prediction that if Donald Trump wins the presidential election and follows through on his stated desire to exert stronger influence over the Federal Reserve, the price of gold could soar close to $5,000 per ounce. The Wall Street bank explained in a recent note to clients that the combination of political uncertainty, potential fiscal expansion, and a weakening of the central bank’s independence could create the perfect environment for investors to rush into safe haven assets. Gold has long been viewed as a hedge against instability and inflation, and any disruption to the credibility of the United States’ monetary policy could magnify demand.

Analysts at Goldman Sachs highlighted that markets currently assume the Federal Reserve will maintain its traditional independence regardless of the outcome in November. However, if a Trump administration were to challenge that independence by pressuring the Fed to cut interest rates more aggressively, investors might worry about inflationary risks and a weaker dollar. In such a scenario, gold would stand out as the main beneficiary. Even though the bank's baseline forecast does not anticipate gold to reach such extremes, it warned that the risk of a sharp rally toward $5,000 should not be underestimated. This outlook is based on how gold prices have historically behaved during times of political or economic turmoil. Investors frequently seek the perceived safety of tangible assets when they lose faith in central bank policies. Trump's credibility could be damaged if he tries to install Fed loyalists or pushes for looser monetary conditions. Goldman Sachs noted that even the perception of interference might be enough to spark a rush into gold. Furthermore, if large deficits and higher government spending accompany such moves, the combination would reinforce inflationary fears.

Gold prices have already been strong in recent years as geopolitical tensions, supply chain challenges, and shifting interest rate expectations fueled investor appetite. At present levels, gold trades well below the five thousand mark, but the path higher could accelerate if confidence in the dollar falters. The Goldman Sachs note emphasized that the role of the United States in the global financial system means that any erosion of trust in its currency or central bank could reverberate across all asset classes. In this context, gold serves as a universal fallback.

Although some participants in the market consider the prediction to be extreme, they acknowledge that unusual political dynamics justify considering out-of-the-ordinary scenarios. The last time the world saw such rapid appreciation in gold was during the financial crisis of 2008 and the subsequent years of quantitative easing. While the present circumstances are different, the common thread is fear of uncontrolled money supply growth and potential inflation. If the Fed were perceived as bending to political pressure, it could mirror those earlier conditions in the eyes of investors.

Trump has criticized the Federal Reserve on multiple occasions, claiming that it keeps interest rates too high and prevents economic growth. His allies have floated ideas ranging from closer oversight of the central bank to appointing figures more aligned with his economic philosophy. Goldman Sachs stressed that while campaign rhetoric does not always translate into policy, markets cannot ignore the possibility. Even a modest challenge to the Fed’s independence could generate a disproportionate reaction in gold markets because of how sensitive investors are to credibility risks.

The broader implications of such a move extend beyond gold. A weakening dollar could spur volatility in foreign exchange markets, affect global trade balances, and shift capital flows toward emerging markets. Bond yields could also react sharply if investors demand higher compensation for inflation risk. Yet gold would likely remain the most visible symbol of investor anxiety. In Goldman Sachs’s view, the metal’s limited supply, universal recognition, and long history as a store of value make it uniquely positioned to capture safe haven demand in such a climate.

In conclusion, while Goldman Sachs does not predict with certainty that gold will reach five thousand dollars an ounce, it presents the scenario as a credible risk worth monitoring. The intersection of politics and monetary policy has always been a sensitive topic for markets. If Trump were to undermine the independence of the Federal Reserve, the consequences for global finance could be profound. In that environment, gold’s role as a refuge could be magnified to unprecedented levels, potentially driving prices toward heights few had previously imagined.