Goldman Sachs said gold prices could surge well above its $4,000 per troy ounce baseline by mid-2026, should private investors diversify more heavily into the metal.

Spot gold prices hit a record high of $3,578.50 per ounce on Wednesday on expectations of a U.S. Federal Reserve interest rate cut later this month, while lingering global uncertainties kept safe-haven demand firmly in play.

"Gold remains our highest-conviction long recommendation," Goldman Sachs said in a note dated Wednesday.

It forecasts gold prices at $3,700 by the end of 2025 and $4,000 by mid-2026, assuming strong central bank buying.

However, this baseline view does not factor in a major shift by private investors out of U.S. dollar assets into gold, a scenario that could push prices to as high as $4,500 per ounce.

It also said that a loss of Fed independence could trigger higher inflation, a rise in long-end bond yields, weaker equities, and a decline in the dollar’s reserve currency status — while gold, as a store of value not reliant on institutional trust - stood to benefit.

U.S. President Donald Trump has intensified efforts to exert control over the Fed, whose ability to manage inflation effectively is widely seen as requiring freedom from political influence over interest rate decisions.

Goldman Sachs also estimated that, assuming all else remains constant, gold prices could approach $5,000 per troy ounce if 1% of the private money invested in the U.S. Treasury market was reallocated to gold.