Goldman Sachs has cut its gold forecast to $4,900: Fed hawks put an end to the rally
The precious metals market has received an alarming signal: my analysis confirms that leading financial institutions are revising their gold expectations amid the tightening of the Fed's monetary policy. Goldman Sachs has adjusted its year-end gold price target down by a full $500 to $4,900 per ounce. The main reason is a sharp cooling of market expectations regarding interest rate cuts in 2026.
The key driver of this revision has been a notable capital outflow from gold-backed exchange-traded funds (ETFs). According to the World Gold Council, investors withdrew approximately $2 billion from such instruments globally in May. Notably, the only region showing net inflows was Europe. Asian funds, on the other hand, lost $1.2 billion — the first such outflow since August last year. Sentiment in the derivatives market is also becoming increasingly bearish.
Why is gold losing its appeal?
The waning interest in gold ETFs is directly linked to the shift in consensus on the Fed's rate. This week, Goldman Sachs economists moved their forecast for the first rate cut from December 2026 to March 2027. Moreover, nine FOMC members now anticipate at least one rate hike this year. If the Fed indeed proceeds with tightening, gold could come under pressure: Goldman Sachs analysts see a potential drop in price to $4,400 by year-end, as the metal would lose some of its appeal as a safe-haven asset.
However, the picture is not entirely one-sided. Central banks continue to provide support to the market. In April, they remained net buyers, increasing reserves by 19 tons. A survey by the World Gold Council shows that about 45% of central banks plan to increase their holdings over the year.
My view: The situation resembles a classic conflict between short-term monetary policy and long-term structural factors. As long as the Fed's hawkish stance dominates, gold will remain under pressure. But strategic buying by central banks creates a solid foundation that will prevent the metal from collapsing catastrophically. Investors should prepare for volatility, but not write off gold in the long term.