Goldman Sachs has cut its gold forecast to $4,900: the main reason is the hawkish stance of the Federal Reserve.
The precious metals market has received a signal for a correction. A leading investment bank has revised its annual gold forecast, cutting it by $500 to $4,900 per troy ounce. The reason for this move lies in a fundamental shift in expectations regarding the Federal Reserve's monetary policy.
Why the forecast was lowered
The key factor undermining the bullish scenario was the weakening demand for gold-backed exchange-traded funds (ETFs). In May, investors withdrew approximately $2 billion from these instruments globally. Notably, the only region showing net inflows was Europe. Asian funds, on the other hand, lost $1.2 billion — the first outflow since August last year.
At the same time, the market is seeing an increase in bearish sentiment. Investors are increasingly less confident in an imminent easing of Fed policy. The bank itself this week shifted its forecast for a rate cut to June and December of next year, having previously expected this move in December 2026 and March 2027. In other words, the prospect of cheap money is receding, reducing gold's appeal as a safe-haven asset.
The Fed's hawkish stance pressures the metal
This week, the regulator kept the key rate in the range of 3.50–3.75%, but the number of supporters for a rate hike is growing. Already nine FOMC members are considering at least one hike this year. If this scenario materializes, analysts do not rule out gold falling to $4,400 by the end of the year. In that case, the metal would lose some of its appeal as a tool for hedging political risks.
Nevertheless, central banks continue to provide support to the market. In April, they once again acted as net buyers, increasing reserves by 19 tons. Additionally, a survey by the World Gold Council shows that about 45% of central banks plan to increase their reserves over the course of the year.
My view: Goldman Sachs' downgrade is not a trend reversal, but an adjustment amid changing macroeconomic realities. Structural demand from central banks remains high, creating a solid "floor" for prices. However, in the short term, as long as the Fed's rhetoric remains hawkish, gold will face pressure. The key support level now is $4,700, and a break below it could open the path to $4,500.