Goldman Sachs has lowered its gold price outlook by $500 per ounce, citing a rising probability that the U.S. Federal Reserve will hike interest rates rather than cut them in 2026.
The investment bank previously targeted $5,400/oz by the end of 2026, driven by strong private investor demand during gold’s strong start to the year. At that time, the metal was trading near $5,000/oz and was on the verge of its all-time high close to $5,600/oz.
Despite a sharp pullback in March amid Middle East tensions and inflation worries, Goldman had initially held its bullish target. However, those pressures have persisted, diminishing expectations for rate cuts and weighing on the non-yielding precious metal.
Gold prices have since fallen back to around $4,100/oz — marking a 27% drop from January peaks. The yellow metal posted three consecutive monthly losses between March and May and is now down about 4% year-to-date.
New Target Still Bullish for H2
Analysts Lina Thomas and Daan Struyven at Goldman Sachs released the updated forecast on Friday. They lowered the year-end 2026 target to $4,900/oz, which still anticipates gains in the second half of the year, albeit more modest than previously expected.
“Our gold price views remain structurally constructive but tactically cautious, with near-term downside risk and medium-term upside risk,” the analysts wrote.
Fed Turns Hawkish Under New Chair
The revision follows the Federal Reserve’s first meeting under new Chair Kevin Warsh, where the central bank signaled a more hawkish policy stance. In his debut press conference, Warsh emphasized restoring price stability, raising expectations for potential rate hikes.
Market pricing has shifted sharply: traders now assign an 87% probability of a rate hike by December, up significantly from 61% before the Fed meeting, according to the CME FedWatch Tool.
Goldman’s economists also cited slower inflows into gold-backed ETFs and a delay in expected rate cuts to June and December 2027 (previously December 2026 and March 2027).
Further Downside Risk
The analysts noted that concerns over the Fed’s independence appear contained for now following Warsh’s surprisingly hawkish debut. However, they warned that an actual rate hike could push their gold price target down another $500 to $4,400/oz, as demand for gold as a macro hedge could fade more permanently.
Rob Kaplan, Goldman Sachs vice chairman and former Dallas Fed president, recently suggested the Fed may need to raise rates as early as September if inflation stays elevated.
Central Bank Support Remains Key
Despite the more cautious near-term view, Goldman continues to highlight supportive factors for gold, particularly strong buying by central banks. Official sector purchases are projected at 50 tons per month this year and 40 tons per month in 2027.
The bank maintains a structurally positive long-term outlook on gold even as it navigates near-term headwinds from higher-for-longer interest rates.
