Goldman Sachs has cut its gold forecast to $4,900: the blame lies with the hawks from the Fed
Goldman Sachs analysts have revised their annual gold forecast downward by $500 to $4,900 per troy ounce. The reason for this decision lies in a fundamental reassessment of expectations regarding the monetary policy of the Federal Reserve System. The market is increasingly losing faith in rate cuts this year, which is putting direct pressure on the precious metal.
Even with this adjustment, the bank's position remains constructive: growth is still expected in the second half of the year, but its pace will be significantly more modest than previously assumed. The key driver of the revision was weak demand for gold-backed exchange-traded funds. According to the World Gold Council, investors withdrew approximately $2 billion from such ETFs worldwide in May alone.
Notably, the only region to show inflows in May was Europe. Asian funds, on the other hand, lost $1.2 billion — the first outflow since August last year. Concurrently, the market is recording an increase in bearish sentiment, which only exacerbates the situation.
Why is gold losing its appeal?
The decline in interest in gold ETFs is directly linked to the fact that market participants are no longer pricing in a Fed policy easing. This week, Goldman Sachs economists moved their forecasts for the first rate cut from December 2026 to March 2027, and then further shifted them to June and December of next year.
At the Fed meeting, the key rate was left in the range of 3.50–3.75%, but the number of supporters of further tightening is growing. Nine representatives of the regulator now expect at least one increase in 2026. If this scenario materializes, gold could fall to $4,400 by the end of the year, making it less attractive as a hedge against political risks.
Former President of the Federal Reserve Bank of Dallas and current Vice Chairman of Goldman Sachs, Rob Kaplan, suggested that a rate hike could occur as early as September.
Central banks as the last bastion
Despite the pressure from ETFs, support for the market comes from central banks. In April, they once again acted as net buyers, increasing their reserves by 19 tons. Moreover, a survey by the World Gold Council shows that about 45% of central banks plan to increase their gold reserves over the year. This creates fundamental support that could restrain a deep correction.
My expert opinion: The current situation is a classic example of a conflict between a long-term trend (central bank purchases) and short-term macroeconomic conditions (tight Fed policy). Until the regulator's hawkish stance eases, gold will remain under pressure. However, structural demand from global monetary authorities, including China and India, will prevent the metal from falling below $4,200–4,400. Investors should prepare for volatility, not a crash.