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Goldman Sachs recommends investors buy gold as recession risks remain high.
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Gold is preferred over Treasurys for hedging the risk of US government instability.
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Central banks’ dollar diversification efforts should also boot gold demand, Goldman said.
Investors should buy gold as the stock market continues to underprice the risk of a recession later this year.
That’s according to Goldman Sachs, who said in a note on Tuesday that gold, even after its 26% year-to-date surge, could zoom past its price target of $3,700.
“We recommend that investors hedge still elevated cyclical recession risk with oil puts and long gold positions,” Goldman Sachs’ Daan Struyven said.
Despite the Trump administration’s 90-day tariff pause, “the chances of recession remains unusually high,” Struyven warned.
The analyst said that the stock market’s sharp rebound since its April low also leaves little upside to be had for risk assets, even if trade relations between the US and China improve.
“The level of policy uncertainty remains very high, businesses and consumers expect very weak activity, real income growth is likely to compress, financial conditions remain tighter than a few months ago, and US production disruptions are plausible,” Struyven said.
Investors got their first taste of an economic slowdown on Wednesday, with first-quarter GDP growth coming in at -0.4%.
If a recession does strike, Goldman says the S&P 500 could plunge 16% from current levels to $4,600.
Struyven prefers gold as a portfolio hedge for investors as compared to Treasurys because Treasurys haven’t been providing as much protection against stock market sell-offs as they used to.
“Longer-dated US Treasuries and USD longs—may continue to fail protecting against equity risk,” Struyven said.
Part of the problem is that in recent weeks, typical safe haven assets like Treasurys and the US dollar have been acting like emerging market assets amid the Trump administration’s chaotic tariff policies and threats against Fed Chairman Jerome Powell.
“The unusual ‘EM-style correlations’ (equities down/yields higher/USD down) that we have seen recently are a clear signal that markets are concerned about what recent policy actions imply about US governance and institutional credibility,” Struyven explained.
As investors choose gold over Treasurys to protect their portfolios, the shiny metal could surge past $3,700 and to as high as $4,800 by mid-2026, representing potential upside of 12% and 21%, respectively.
