Goldman Sachs has cut its gold forecast to $4,900: the Fed's hawkish stance pressures the metal
Leading investment bank Goldman Sachs has revised its year-end gold price forecast, slashing it by $500 to $4,900 per troy ounce. The key driver of this revision is a sharp weakening of market expectations regarding a Federal Reserve rate cut in 2026.
Despite this significant downgrade, the bank's analysts maintain a positive outlook for the precious metal in the second half of the year, although they acknowledge that the growth momentum will be considerably weaker than previously assumed. The revision is based on a structural shift in market sentiment: investors are increasingly less confident in an imminent easing of Fed monetary policy.
Waning Interest in Exchange-Traded Funds
The main trigger for the forecast revision was cooling demand for gold exchange-traded funds (ETFs). According to my data, approximately $2 billion was withdrawn from such funds globally in May. Notably, inflows were only observed in European funds, while Asian ETFs lost $1.2 billion — the first net outflow since August 2025. This signals growing skepticism among institutional investors, who are increasingly hedging risks.
Fed in No Rush to Ease Policy
This week, the Fed left rates unchanged in the 3.50–3.75% range, but the number of policymakers favoring tightening is growing. Nine committee members now see at least one rate hike in 2026. Goldman Sachs economists responded swiftly, pushing their forecast for the first rate cut to December 2026, and then to March 2027.
If the Fed does decide to raise rates, Goldman Sachs suggests gold could fall to $4,400 by year-end. In this scenario, the metal would lose some of its appeal as a safe-haven asset against political risks. Former Dallas Fed President and current Goldman Sachs Vice Chairman Rob Kaplan does not rule out that a hike could occur as early as September.
Central Banks Remain in the Game
An important supporting factor for gold remains central bank purchases. In April, net purchases totaled 19 tons, and a World Gold Council survey shows that about 45% of central banks plan to increase reserves over the next 12 months. However, this is not yet enough to offset weakening demand from ETF investors.
My opinion: Goldman Sachs' forecast revision is not a trend reversal, but a pragmatic response to changes in the macroeconomic landscape. Gold remains a key diversification tool, but in the short term, its dynamics will be entirely dependent on Fed rhetoric. Investors should brace for increased volatility.