It’s the kind of bold forecast that grabs every trader’s attention: Goldman Sachs (GS) is predicting that gold (GCZ25) could surge to $5,000 by the end of next year.

During the Sept. 5 Market on Close livestream, John Rowland, CMT, joined to unpack the story after Twitter Tom asked whether this prediction is realistic — or just a throwaway number.

Dollar Slides and Gold Rallies to a Record on the Outlook for Fed Rate Cuts

Dollar Weighed Down by the Prospects of Easier Fed Policy

After Touching a 14-Year High, How Much Higher Can Silver Go From Here?

Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. Sign Up Now!

At the core of Goldman’s call is the idea of Federal Reserve independence.

If the Fed becomes more politically pressured and more accommodating — especially if short-term rates are cut aggressively — that can fuel inflationary expectations. And inflation fears almost always drive flows into gold.

Normally, gold rallies are tied to U.S. dollar weakness. But John highlighted a different driver this time:

Petrodollars once recycled into Treasuries are now being diverted.

Central banks are buying gold instead of Treasuries.

Global central bank reserves of gold are now at 27%, which is the highest in 30 years.

U.S. Treasury reserves, meanwhile, are at 23% — the lowest since the Global Financial Crisis.

This shift shows gold is increasingly being treated as the hard-asset alternative to U.S. debt.

With demand from central banks, concerns over inflation, and questions around Fed independence, the stage is set for significant upward pressure.

Whether or not we reach $5,000 an ounce, the message is clear: gold is back in the spotlight as a hedge and as an active trade.

Track Gold Futures prices and other precious metals.

Explore the ETF Finder for targeted exposure to commodities, metals, and miners.

Use the Futures Heat Map to quickly gauge commodity trends.

Stay on top of upcoming inflation data and Fed events with the Economic Calendar.

Goldman Sachs’ $5,000 forecast may sound extreme — but with central banks shifting reserves and inflation risks lingering, it’s a scenario worth taking seriously.

Watch the quick clip here:

Stream the full Market on Close episode for more, and turn on email notifications so you never miss a live breakdown.

On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com