Gold's rally isn't a sign of a commodity supercycle, Goldman Sachs says

• Gold's rally doesn't mean a commodity supercycle is here, Goldman Sachs says.
• Central bank buying, Fed rate cuts, and call options demand are powering gold.
• Unlike gold, other commodities can ramp up production as prices climb.

Gold's powerful rally isn't a sign that a broader commodity boom is taking hold, Goldman Sachs says.

The yellow metal has been on a record run, surging past $5,500 per troy ounce late last month before pulling back. Spot gold was trading around $4,993 per troy ounce at 10:53 p.m. ET on Sunday, up about 17% this year.

"We're not expecting a super cycle where prices will just go higher forever," said Lina Thomas, a senior commodities analyst at Goldman Sachs, on the firm's "The Markets" podcast published on Friday.

That's even as the bank maintains a positive outlook on bullion. "We're still bullish gold," Thomas said, adding that the bank is "expecting gold to go to $5,400 by the end of 2026."

Policy fears and positioning

Gold's surge reflects a mix of structural buying and tactical flows.

Central banks have been accumulating gold as a hedge against geopolitical and financial risks. At the same time, Federal Reserve rate cuts have lowered the opportunity cost of holding non-yielding assets, such as gold.

Thomas also pointed to the "debasement trade" — investor concerns about government finances in Western economies — as a key force behind demand.

That theme has spilled into the options market. Investors have increasingly bought gold call options, which give them the right to buy gold ETFs at a set price in the future. As those bets build, banks and dealers who sold the contracts often purchase gold to manage their exposure, helping accelerate rallies.

However, the same mechanism can amplify pullbacks.

The supply divide

In contrast to the strength in bullion, Goldman does not see the ingredients for a prolonged, broad-based commodities supercycle.

"Gold is something that you cannot bump. It's something that you cannot scale. It's something that the production is just very constrained," Thomas said.

Other commodities don't share those limits. Higher prices in markets like copper typically encourage more output.

That supply response makes it harder for industrial commodities to sustain ever-rising prices, even if governments and investors are increasingly focused on securing materials.

Silver, meanwhile, has been far more volatile. Thomas described the metal's recent swings as "a story of a liquidity squeeze," centered in London, where global benchmark prices for precious metals are set.

About half the silver in London vaults is already spoken for, and that available supply has shrunk as traders moved metal to the US ahead of potential tariffs.

With less silver to trade, just as investor demand picked up, prices have swung sharply, and Goldman doesn't expect that volatility to ease anytime soon.

Spot silver was trading around $75.40 per ounce, off sharply from its all-time high above $121 per ounce in late January.