Goldman Sachs has lowered its year-end gold price forecast by $500 an ounce, amid declining expectations that the US Federal Reserve will cut interest rates in 2026.
According to a note from the bank's analysts, Lena Thomas and Dan Stroeven, the target price has been revised to $4,900 an ounce by December, indicating that the precious metal will continue to rise during the second half of the year, but at a slower pace than previously estimated, according to Bloomberg News.
A cautious look at the short term
According to Bloomberg News, the analysts explained that their outlook for gold prices remains structurally positive, but is cautious in the short term, with downside risks in the near term and upside risks in the medium term.
Goldman Sachs is one of the most prominent and optimistic institutions regarding gold in recent years, as it was among those that strongly recommended investing in the precious metal in late 2024, predicting at the time a strong upward wave that actually materialized.
Pressure on gold due to monetary policy
Gold prices have been under pressure in recent months, with rising energy prices due to tensions in the Middle East, reinforcing expectations of tighter monetary policy.
Although the Federal Reserve kept interest rates unchanged this week, policymakers indicated growing support for a rate hike this year. Meanwhile, the Fed's new chairman, Kevin Warsh, pledged to restore price stability.
Investment flows are one of the most prominent factors
Analysts noted that the downward revision of expectations was driven by an anticipated decline in investment flows into gold-backed exchange-traded funds (ETFs), following the postponement of expectations for a US interest rate cut.
Interest rates are now expected to be cut in June and December of next year, compared with previous estimates that pointed to December 2026 and March 2027.
Impact of the new Federal Reserve leadership
The report added that concerns about the Federal Reserve's independence may be limited, given what it described as the surprisingly hawkish tone during the first meeting led by Warsh.
US President Donald Trump appointed Warsh as chairman of the Federal Reserve, after repeated criticism of his predecessor for not cutting interest rates enough.
Alternative scenario: further decline
The bank warned that if the Federal Reserve moves to raise interest rates, demand for gold as a hedge against economic policies could decline more sustainably, potentially pushing prices down to $4,400 an ounce by the end of the year.
In the same context, Rob Kaplan, vice president of Goldman Sachs and former president of the Federal Reserve Bank of Dallas, indicated that the central bank may have to raise interest rates as early as September if inflationary pressures persist.
Supporting factors still exist
Despite the cautious outlook, analysts pointed to the continued presence of factors supporting gold, including central bank purchases.
The report predicted that official sector purchases would reach about 50 tons per month during 2026, before decreasing to about 40 tons per month in the following year.
Recent price performance
Gold has recently been trading near $4,165 an ounce, heading for its third consecutive weekly loss.
The precious metal had hit a record high of nearly $5,600 an ounce at the end of January, before continuing to decline, recording its third consecutive monthly drop in May.
