Goldman cuts gold price forecast down to $4,900

Goldman Sachs has slashed its gold price forecast by $500 an ounce to reflect the increased likelihood that the US Federal Reserve will raise rather than cut interest rates this year.

The bank had previously set a price target of $5,400/oz. by the end of 2026, citing growing demand for bullion among private-sector investors amid a hot start to the year. At the time, the precious metal was trading at nearly $5,000 and was days away from setting its record high of nearly $5,600/oz.

That target was kept intact late March, despite weeks of sharp decline as geopolitical tensions in the Middle East roiled markets and ignited concerns over global inflation. Since then, those worries have intensified and gradually reduced the chances of Fed rate cuts, a scenario that would hurt the non-yielding gold.

Prices have now reversed back to the $4,100/oz. level — a 27% decline from its January highs. Between March and May, the yellow metal has recorded three straight monthly losses, and is now down 4% on the year.

According to Goldman analysts Lina Thomas and Daan Struyven, the new price target of $4,900/oz. still implies that gold would gain ground in the second half of the year, but just less than previously expected.

“Our gold price views remain structurally constructive but tactically cautious, with near-term downside risk and medium-term upside risk,” they wrote in a note on Friday.

Rate hike chances surge

The revision comes two days after the Federal Reserve, in its first meeting under new Chair Kevin Warsh, hinted at a hawkish shift in the US central bank’s policy. In his first press conference in the role, Warsh vowed to restore price stability, a signal that rate hikes could be on the cards.

Traders now see an 87% chance of a US rate hike in December, a significant jump from 61% prior to the Fed decision, according to the CME FedWatch Tool.

In its outlook, the Goldman economists also factored in slower inflows into gold-backed exchange-traded funds, with the expectation that the Fed will push back rate cuts to June and December of next year. Before, the rate reductions were projected for December 2026 and March 2027.

Further downside

Further concerns over Fed’s independence may be limited given the “surprisingly hawkish” first meeting under Warsh’s leadership, they added. In the lead-up to Warsh’s appointment, investors had expected a less hawkish stance, given US President Donald Trump’s dissatisfaction with his predecessor Jerome Powell on not cutting interest rates.

In the event of a rate hike, the Goldman analysts said their year-end gold price forecast could drop by another $500 to $4,400/oz., as “demand for gold as a macro policy hedge could unwind more persistently.”

Some Goldman executives have recently flagged that possibility. The Fed may need to raise rates as soon as September if inflation remains elevated, Rob Kaplan, vice chairman at Goldman Sachs and former Dallas Fed president, said in an interview with Bloomberg this week.

Nevertheless, the Wall Street giant still sees some supportive factors for gold, namely robust central-bank buying. Official sector purchases were seen at 50 tons a month this year and 40 tons a month next year, the analysts noted.

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