Goldman Sachs Predicts $4000 Gold as Central Banks Choose Gold Over Bitcoin

A weakening dollar and rising geopolitical uncertainty are driving a surge in demand for gold.

Goldman Sachs predicts that gold prices could hit $4,000 per ounce, outperforming both Bitcoin and silver as the world’s most trusted safe-haven asset, reported Bloomberg.

The bank's analysts highlight a weakening dollar and rising geopolitical uncertainty are driving a surge in demand for the precious metal.

Central banks are increasingly turning to gold over Bitcoin as they seek to diversify their foreign exchange reserves. This shift is being fueled by concerns over currency stability and the potential for large-scale economic sanctions.

Thomas: Central Banks Prefer Gold Due to Bitcoin's Tech Stock Link

Goldman Sachs strategist Lina Thomas explains that the traditional relationship between U.S. interest rates and gold prices has changed. Usually, higher rates push investors toward Treasury bonds, pulling them away from gold. However, this trend broke down after Russia's invasion of Ukraine in 2022.

When Western governments froze Russian central bank reserves, it sent a clear message to other nations: dollar and euro reserves may no longer be risk-free. This event, according to Thomas, "shook trust in Western currencies and set the stage for a shift in reserve strategies."

In response, central banks have been aggressively buying gold, with monthly purchases increasing from 17 tons before the war to 22 tons afterward. By 2025, these purchases are expected to reach 94 tons per month.

Among those pivoting toward gold are China and Russia. As part of its broader economic strategy, China aims to convert 20 percent of its reserves into the precious metal.

Gold Vs. Bitcoin, Silver: Key Differences

While both gold and Bitcoin are praised for limited supply and inflation resistance, Goldman Sachs views gold as the more reliable hedge.

Gold's stability and low correlation with equities make it more suitable for risk-averse investors, says Daan Struyven, co-head of commodities research.

"Bitcoin's volatility and ties to tech stocks limit its appeal during economic stress," Struyven adds. This is also why central banks are pivoting toward gold over digital assets.

Meanwhile, silver is being left behind. Thomas cites three key drawbacks: silver tarnishes, is harder to store and transport, and lacks recognition as a reserve asset by institutions like the I.M.F.

"Silver is more of an industrial material than a monetary one," she says.

Lastly, Goldman Sachs notes that gold remains a small part of global financial markets—only 0.5 percent of the total stock market value. This means even minor shifts in portfolio allocations can create outsized moves in gold prices.

"Gold is no longer just a historical store of value. It's becoming a renewed symbol of trust as confidence in fiat currencies erodes," Thomas concludes.