Gold prices could soar to between $8,395 and $12,595 per ounce if central banks continue increasing their gold reserves to historical levels, according to a new forecast that has energized precious metals investors. Dan Oliver, founder of gold and silver mining hedge fund Myrmikan Capital, outlined this gold price forecast in a note published Monday, arguing that current valuations significantly underestimate the metal’s potential.
The precious metal was trading around $5,060 per ounce on Tuesday, representing a 72% increase over the past 12 months. Oliver’s analysis centers on gold’s proportion within central bank reserves, which he believes must rise substantially from current levels. According to the hedge fund manager, markets have historically forced central banks to maintain gold reserves between one-third and one-half of total holdings.
Central Bank Gold Reserves Drive Price Prediction
Oliver’s thesis focuses on what happens when central banks rebalance their reserve portfolios away from other assets. He stated in his Monday note that gold could actually approach 100% of reserves following a “cleansing” event that diminishes the value of holdings like US Treasurys. The forecast assumes that deteriorating conditions in debt markets will force monetary authorities to increase their gold allocations dramatically.
The hedge fund founder argued that Fed manipulation has artificially inflated Treasury prices, particularly for longer-term bonds. “We don’t claim that U.S. Treasuries are worthless, but they are certainly worth less than where the Fed-manipulated market prices them,” Oliver wrote, according to the note.
Three-Phase Rally Expected for Gold Market
According to Oliver’s analysis, the current gold rally represents only the first phase of a much larger move. He outlined a three-stage scenario beginning with rising stress in US debt markets and the global dollar system. The second phase, which has not yet begun according to the forecast, will occur when markets realize the Federal Reserve cannot control interest rates without massive bond purchases.
The third and final phase would involve what Oliver described as a “government bond death spiral.” In this scenario, rising interest rates increase government interest payments, worsening deficits and forcing additional Treasury issuance that pushes rates even higher. However, the forecast did not provide specific timelines for when these phases might unfold.
Meanwhile, the prediction has generated considerable enthusiasm among gold market participants. A derivatives veteran with 30 years of experience stated on social media that Oliver’s analysis was “the best thing I have read all day.” Luke Gromen, founder of market research firm Forest for the Trees, also praised the forecast, while Brien Lundin, CEO of the New Orleans Investment Conference, described the analysis as “fantastic.”
Growing Investor Interest in Precious Metals
The gold price forecast arrives as both institutional and retail investors have embraced the precious metal during its extended rally. Some market observers have compared gold’s recent performance to movements typically seen in meme stocks rather than traditional safe-haven assets. Additionally, foreign investors appear to be reducing their exposure to US dollar-denominated assets, a trend Oliver believes will accelerate.
Central bank gold demand has emerged as a secondary driver supporting higher prices in recent years. According to industry observers, monetary authorities worldwide have been net buyers of gold as they diversify reserve holdings. This shift away from dollar dominance has provided fundamental support for precious metals alongside traditional inflation-hedge demand.
In contrast to Oliver’s bullish outlook, the forecast contains significant uncertainties regarding timing and the severity of debt market disruptions. Authorities have not confirmed whether Treasury market stress has reached levels that would trigger the large-scale Fed intervention Oliver anticipates. The analysis also depends on assumptions about foreign central bank behavior that may not materialize as predicted.
Market participants will be monitoring Federal Reserve policy decisions and Treasury auction results for signs that Oliver’s predicted second phase is beginning. However, the timeline for any potential bond market crisis remains highly uncertain, and gold prices could experience significant volatility before reaching the forecast targets.
