Goldman Sachs cuts gold forecast to $4,900: hawkish Fed stance weighs on market
Leading investment bank Goldman Sachs has revised its annual gold forecast, slashing its year-end price target by $500 to $4,900 per troy ounce. The reason for such a sharp move lies in a fundamental shift in market expectations regarding the monetary policy of the U.S. Federal Reserve. The market is increasingly skeptical about the possibility of rate cuts in 2026, which is putting direct pressure on the precious metal.
Even after this adjustment, the bank maintains a positive outlook on gold for the second half of the year, although it acknowledges that the growth potential is now less significant than previously assumed. Analysts note that the key factor behind the revision was the weakening demand for gold-backed exchange-traded funds (ETFs). Investors worldwide withdrew approximately $2 billion from such funds in May, with outflows from Asian ETFs reaching $1.2 billion—the first time since August last year. European funds were the only region to show net inflows.
At the same time, bearish sentiment has intensified in the options market. In my observation, this is a direct consequence of the shift in the Fed's rhetoric. This week, the regulator kept the key rate in the range of 3.50–3.75%, but the number of supporters of further hikes is growing. Already, nine Fed officials are considering at least one rate hike in 2026. Goldman Sachs economists have even pushed back their forecast for a rate cut to December 2026 and March 2027, whereas previously they had expected easing in December of this year.
In the event of a rate hike scenario, Goldman Sachs analysts anticipate gold could fall to $4,400 by the end of the year. This would make the metal less attractive as a hedge against political risks. Former Dallas Fed President and Goldman Sachs Vice Chairman Rob Kaplan does not rule out a rate hike as early as September.
However, there is also a supporting factor. Central banks continue to increase their gold reserves. In April, net purchases totaled 19 tons, and a survey by the World Gold Council shows that about 45% of central banks plan to increase their holdings over the year. This creates a solid foundation for prices but does not negate the short-term pressure from U.S. monetary policy.
My professional opinion: The gold market is currently in a zone of turbulence, where short-term prospects are determined solely by the Fed's actions. The growth potential from central bank purchases is real, but it will not be able to compensate for the loss of interest from speculative investors if rates indeed rise. Investors should prepare for increased volatility in the second half of the year.