Goldman Sachs has cut its gold forecast: new market realities and the Fed's stance
A major revision of gold price targets occurred this week. The forecast price for the precious metal at the end of the year was adjusted downward by $500 to $4,900 per ounce. The main catalyst for this decision is a fundamental change in market expectations regarding the monetary policy of the Federal Reserve System.
Analysts note that a sharp decline in demand for gold-backed exchange-traded funds (ETFs) became a key factor putting pressure on the price. According to the latest data, in May, investors worldwide withdrew about $2 billion from these instruments. Notably, European funds saw a small inflow, while Asian hedge funds and asset management companies, on the contrary, recorded an outflow of $1.2 billion — for the first time since last August. This indicates a shift in sentiment: the market is increasingly less confident in rate cuts in 2026.
Last week, Goldman Sachs economists moved their forecast for the first Fed rate cut from December 2026 to March 2027. Moreover, nine FOMC members now expect at least one rate hike this year. If this happens, gold could face additional pressure, and analysts do not rule out a decline to $4,400 by the end of the year. In this scenario, the metal loses its appeal as a safe-haven asset against political risks.
However, the situation is not entirely clear-cut. Central banks continue to support the market. In April, they once again acted as net buyers, increasing reserves by 19 tons. Furthermore, a survey by the World Gold Council showed that about 45% of central banks plan to increase reserves over the course of the year. This creates a solid foundation for long-term growth, despite the current correction.
My opinion: The gold market is entering a phase of reassessment, where short-term prospects are overshadowed by the hawkish rhetoric of the Fed, but structural demand from sovereign investors remains exceptionally strong. The current correction may offer interesting entry points for long-term portfolios, especially against the backdrop of ongoing geopolitical uncertainty. Investors should be prepared for increased volatility in the second half of the year.