Goldman Sachs lowers gold forecast: hawkish Fed policy weighs on market
Goldman Sachs' analytical division has adjusted its year-end gold target, lowering it by $500 to $4,900 per troy ounce. The reason for this revision lies in a fundamental shift in market expectations: investors are increasingly less confident in a loosening of the Federal Reserve's monetary policy in 2026.
Even with this adjustment, the bank maintains a positive medium-term outlook for the precious metal, expecting growth in the second half of the year, but not as aggressive as previously assumed. Goldman Sachs analysts, notably Lina Thomas and Daan Struyven, noted in their research note that a key pressure factor has been waning interest in gold-backed exchange-traded funds (ETFs).
According to data from the World Gold Council, approximately $2 billion was withdrawn from global gold ETFs in May. Inflows were only observed in European funds, while Asian ETFs lost $1.2 billion — the first net outflow from the region since August 2025. Against this backdrop, bearish sentiment among market participants has intensified, also confirmed by options activity.
The weakening interest in gold ETFs is directly linked to the revision of expectations regarding the Fed rate. This week, Goldman Sachs economists shifted their forecasts for rate cuts to June and December of next year, whereas previously they expected cuts in December 2026 and March 2027. The market now assesses the probability of at least one rate hike in 2026 as very high — nine Fed officials support this scenario.
Fed's Hawkish Stance and Support from Central Banks
This week, the Fed kept the key rate in the range of 3.50–3.75%, but the number of proponents for further tightening is growing. If the regulator does decide on a hike, Goldman Sachs forecasts gold falling to $4,400 by year-end, making the metal less attractive as a safe-haven asset against political risks. Former President of the Federal Reserve Bank of Dallas and Vice Chairman of Goldman Sachs, Rob Kaplan, admitted the possibility of a rate hike as early as September.
However, the market receives significant support from global central banks. In April, they once again acted as net buyers of gold, increasing their reserves by a net 19 tons. Moreover, a World Gold Council survey shows that about 45% of central banks plan to increase their holdings over the next year.
My analysis: The downgrade of Goldman Sachs' forecast is a signal that cannot be ignored. It reflects a broader trend: the market is reassessing macroeconomic realities. Nevertheless, structural demand from central banks remains a powerful anchor for gold. In the short term, pressure from the Fed will dominate, but any shift in the regulator's rhetoric could trigger a sharp reversal. Investors should be prepared for increased volatility.