"Gold has its moment when people lose all confidence in all currencies and other places to store value and also when interest rates are very low so that gold is relatively cheap to hold compared to where they can have their alternatives," Blankfein said. "As people get more confidence in their economies and their currencies and as rates start to rally, it's not a very favorable market for gold."
Blankfein pointed to an array of bright spots in the economy such as a shrinking deficit, greater energy independency and ample liquidity. The problem, he said, is poor sentiment among Americans. The financial crisis has left many businesses and institutions adverse to risk taking for fear of failure, which Blankfein said is detrimental to progress and confidence.
"Sentiment has a real effect. This is not natural science. It's a social science, so sentiment and people's feeling really matters in this thing," Blankfein said. "Confidence really matters."
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—By CNBC's Drew Sandholm. Follow him on Twitter @DrewSandholm.
— Reuters contributed to this report