Goldman Sachs has cut its gold forecast to $4,900: the Fed's hawkish stance weighs on the market
A major investment bank has revised its annual gold forecast downward by as much as $500 per ounce. The new target price is $4,900. The key factor behind this decision is a sharp weakening of market expectations regarding a loosening of the Federal Reserve's monetary policy in 2026.
Analysts note that even with this adjustment, the bank maintains a positive outlook for the precious metal in the second half of the year, though it is no longer as optimistic as before. The main reason for the revision is a noticeable decline in capital inflows into gold-backed exchange-traded funds (ETFs). In May, investors worldwide withdrew approximately $2 billion from such instruments.
Interestingly, the only region to show net inflows in May was Europe. Asian funds, on the other hand, lost $1.2 billion — the first outflow since August 2025. Against this backdrop, bearish sentiment has noticeably strengthened in the market, and investors are increasingly hedging risks through put options.
The weakness in demand for gold ETFs is directly linked to changing expectations regarding the Fed's interest rate. This week, the bank's economists moved their forecasts for the first rate cut to June and December of next year, whereas they previously expected this step in December 2026 and March 2027.
The Fed's Hawkish Stance and Risks for Gold
The Fed kept its key interest rate in the 3.50–3.75% range this week, but the number of supporters for further policy tightening is growing. Nine members of the regulator now anticipate at least one rate hike in 2026.
If the Fed does decide to raise rates, Goldman Sachs forecasts gold could fall to $4,400 by the end of the year. In this scenario, the metal would lose some of its appeal as a safe-haven asset against political risks. Moreover, the former head of the Federal Reserve Bank of Dallas, now a vice chairman of the bank, did not rule out that a rate hike could occur as early as September.
Nevertheless, central banks continue to provide support to the market. In April, they once again acted as net buyers, increasing their reserves by a net 19 tons. According to a survey by the World Gold Council, about 45% of central banks plan to increase their holdings over the next year.
My analysis: The revision of Goldman Sachs' forecast is a signal that cannot be ignored. The gold market finds itself trapped between the Fed's hawkish rhetoric and structural demand from central banks. In the short term, pressure on the metal will persist, but the long-term trend of reserve de-dollarization has not disappeared. Investors should prepare for increased volatility in the second half of the year, especially if the Fed indeed decides to raise rates.