The erosion of the Federal Reserve’s independence could accelerate investor flows into gold and push prices well above existing forecasts, reinforcing the precious metal’s status as a hedge against political and economic uncertainty.
In its September commodities outlook – Diversify into commodities, especially gold – Goldman Sachs stated that political pressure on the US central bank would undermine its inflation-fighting credibility and weaken the US dollar’s global standing.
Goldman Sachs analysts said a scenario where the Fed’s independence is damaged would “likely lead to higher inflation, higher long-end rates, lower stock prices and an erosion of the dollar’s reserve currency status”.
“Should private investors look to diversify more heavily into gold, as have central banks, we see potential upside to gold prices even above our tail risk scenario of US$4,500/oz, which itself is already well above our US$4,000 mid-2026 baseline,” the analysts said.
The bank’s research suggested that even a modest reallocation out of Treasuries could lift the price of gold to new highs.
“We estimate that if 1 per cent of the privately owned US Treasury Market were to flow into gold, the gold price would rise to near US$5,000/oz, assuming everything else constant,” Goldman’s analysts stated.
Nigel Green, CEO of deVere Group, similarly tipped gold would hit US$5,000 by the end of the first quarter of 2026, arguing the drivers are already in place and momentum is compounding.
“Gold thrives in environments where governments appear unpredictable,” Green said. “Attacks on the independence of the Federal Reserve, erratic trade policy, and spiralling deficits are all elements that erode confidence in fiat currencies. Investors respond by turning to assets that are politically neutral and globally recognised.”
State Street Investment Management also flagged that concerns about the Fed’s independence are expected to continue supporting alternative-fiat and hedge demand for bullion in its September Monthly Gold Monitor.
The wealth manager said spot gold’s strong start to the month – at prices above US$3,500/oz – was driven mainly by “stretched equity/tech valuations, ongoing steepening in developed market government bond curves, and significant US policy uncertainty” – issues that are predicted to persist.
The firm revealed that given these settings and the bond market’s growing expectations of a more dovish Fed, it is “likely” to raise its long-standing bull case gold price range (US$3,500–3,900) from 30 per cent to 40 per cent in October.
“We also maintain a ‘floor price’ for gold at US$3,100 on the lowest end of our base case range, and find it more likely than not that the next US$500 move is higher for the yellow metal over the next 6–12 months,” the wealth manager said, adding that it sees a 50/50 probability of a break towards US$3,600–3,700 before quarter-end.
An increase in investor demand for gold was also reflected in exchange-traded fund (ETF) activity, with August seeing inflows of US$4 billion into US-listed gold ETFs.
Interestingly, State Street highlighted the largest monthly divergence in bitcoin versus gold ETFs whereby bitcoin ETFs recorded outflows of US$0.9 billion, pointing to it possibly signalling macro risks.
“While net inflows for both alt-fiat sectors are positive on the year, the recent decline in the bitcoin/gold ratio may imply investor demand for low volatility assets, risk-off hedges, and liquidity is on the rise,” it said.
The World Gold Council reported a similar surge in ETF demand, pointing to inflows of US$5.5 billion (53 tonnes) into gold ETFs globally in August – dominated by North America and Europe.
According to the council, this momentum helped drive gold to US$3,429/oz by month-end, up 31 per cent on the year, with prices carrying strength into September.
The council highlighted that the steepening US yield curve – driven by falling short-end rates and sticky long-end yields – reflects unease about fiscal deficits and inflation. These dynamics, it argued, continue to favour gold as both a safe haven and an alternative to the US dollar.
Earlier this week, Global X’s senior product investment strategist, Marc Jocum, stated that Australian investors are on track to funnel over $1 billion into gold ETFs in 2025 amid Fed rate cut speculation.
Jocum noted the “increasing speculation” that gold could test the US$4,000 level as early as 2026, which would mark a further 15 per cent upside from current levels.
