Goldman Sachs has cut its gold forecast to $4,900: hawkish Fed policy weighs on the market
A leading investment bank has revised its annual gold target, lowering it by $500 to $4,900 per ounce. The key factor behind this adjustment is the waning hopes for a loosening of the U.S. Federal Reserve's monetary policy in 2026.
The bank's analysts, who previously forecasted a more aggressive rise for the precious metal in the second half of the year, now expect a more modest upward movement. The main trigger for the revision was a sharp decline in demand for gold-backed exchange-traded funds (ETFs).
According to estimates, investors withdrew about $2 billion from global gold ETFs in May. The only exception was European funds, which saw a small inflow. Asian ETFs, on the other hand, recorded an outflow of $1.2 billion — the first since August last year. This trend reflects a growing bearish sentiment among market participants.
The reason for the cooling interest in safe-haven assets is obvious: the market is increasingly less confident in a Fed rate cut. This week, the bank's economists already moved their expectations for the first reduction in borrowing costs to December 2026, and then to March 2027. Moreover, nine Fed members currently anticipate at least one rate hike this year.
The Fed's hawkish pivot creates a strong headwind for gold. If the regulator indeed decides to tighten, prices could fall to $4,400 by the end of the year, analysts warn. In this scenario, the metal loses its appeal as a hedging tool against political and economic risks.
However, it's not all clear-cut. Central banks continue to provide support to the market. In April, they once again acted as net buyers, increasing their reserves by 19 tons. Furthermore, about 45% of the world's central banks, according to a World Gold Council survey, plan to increase their holdings over the next 12 months.
Expert opinion: While institutional investors are exiting ETFs, central banks are playing the role of a safety cushion. But if the Fed actually starts raising rates, this fundamental factor may not prevent gold from correcting. In the short term, $4,900 looks more like an optimistic scenario than a baseline one.