"In Japan, a Single Gold Bar Could Buy a New House"... Shocking Analysis Amid Soaring Gold Prices

Goldman Sachs Projects $5,000 per Ounce Next Year
Nikkei: "If Realized, Equals the Price of a Detached House in Yamagata Prefecture"

The price of gold has reached an all-time high, continuing its seemingly endless rally. This is driven by a weaker dollar due to expectations of interest rate cuts in the United States, as well as increased gold holdings by global central banks. As some now suggest that gold could surpass $5,000 per ounce in the first half of next year, analysts in Japan have noted that, if this scenario materializes, it may become possible to purchase a house with a single 1 kg gold bar.

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Gold Prices in an Endless Rally... "A Smartphone-Sized Gold Bar Could Buy a House"

On September 11, the Japanese newspaper Nihon Keizai Shimbun (Nikkei) reported, "Goldman Sachs's gold price scenario is a hot topic in the market," adding, "With concerns over worsening situations in Russia and the Middle East, the trend of funds flowing into gold as a safe asset is expected to continue."

If the price of gold rises as projected by the American investment bank Goldman Sachs, it is analyzed that one could purchase a house in Japan with 1 kg of gold. Photo by Asia Economy Database

In a recent report, Goldman Sachs projected, "If 1% of privately held U.S. Treasury assets move into gold due to a perceived erosion of the Federal Reserve's independence, the price of gold could soar to $5,000 per ounce (about 6,965,000 KRW) in the first half of next year." This would be equivalent to nearly 1 million KRW per "don" (a traditional Korean unit of gold).

Nikkei explained, "If we apply Goldman Sachs's projection and use an exchange rate of 147 yen to the dollar, the price of 1 kg of gold would be 23.6 million yen (approximately 222.5 million KRW)." The newspaper further noted, "This exceeds the average price of a newly built detached house in Yamagata Prefecture, which was 21.68 million yen (about 204.4 million KRW), according to the East Japan Real Estate Distribution Organization's August report." Nikkei commented, "A world may come where you can buy a house with a gold bar the size of a smartphone."

Expectations of Fed Rate Cuts and a Weak Dollar Are Driving the Rally

The biggest factor behind the rise in gold prices is the expectation of interest rate cuts by the U.S. Federal Reserve. Due to recent weak employment data, the market widely anticipates that the Fed will lower rates by at least 0.25 percentage points at next week's meeting. Some investors are even betting on a "big cut" of 0.5 percentage points.

The weakening dollar is also pushing gold prices higher. The U.S. Dollar Index (DXY), which measures the dollar against the currencies of six major countries, is currently hovering in the mid-97 range. This is a significant drop compared to the end of last year, when it was close to the 110 level.

If the price of gold rises as projected by the American investment bank Goldman Sachs, it is analyzed that one could purchase a house in Japan with 1 kg of gold. Photo by Asia Economy Database

Political factors have also played a role. Former President Donald Trump attempted to dismiss Federal Reserve Governor Lisa Cook, who is known for her hawkish stance, sparking controversy over the Fed's independence. As a result, investors concerned about the uncertainty of dollar-denominated assets are flocking to gold.

Another factor supporting the rise in gold prices is the increased gold holdings by global central banks. Following the freezing of Russia's foreign reserves by Western countries after the outbreak of the Russia-Ukraine war, the movement toward "de-dollarization" has accelerated, especially among emerging economies. Central banks around the world are rapidly increasing the share of gold in their foreign reserves as they diversify their holdings.