Central Bank Buying to Provide Gold Price Floor, Goldman Sachs Says

Strong and accelerating gold purchases by global central banks are likely to establish a price floor for the precious metal, according to a client note from Goldman Sachs. The bank stated that this robust demand should provide support for gold even as it faces temporary headwinds from market expectations of a more hawkish Federal Reserve.

A Surge in Official Sector Demand

Goldman Sachs' analysis points to a significant re-acceleration in buying from the official sector. The bank's nowcast estimates that central banks purchased 81 tonnes of gold in May.

• On a three-month seasonally adjusted basis, this averages 67 tonnes per month.
• This figure starkly contrasts with the pre-2022 average of just 17 tonnes per month.
• Analysts noted a large contribution from China in the recent acceleration.

This trend, which Goldman Sachs views as a multi-year development, is expected to provide a buffer against potential price downside.

Long-Term Outlook Remains Bullish

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In the near term, gold faces pressure as markets price in potential Fed rate hikes, which typically dampens demand for non-yielding assets. However, Goldman's own economists forecast no rate hikes, suggesting this pressure could reverse. The bank's long-term view is anchored by the ongoing diversification of reserves by emerging market central banks, a trend catalyzed by the 2022 freezing of Russia's reserves.

This structural shift underpins Goldman Sachs' end-2026 gold price forecast of $4,900 per troy ounce. The bank maintained its assumption of average monthly central bank buying of 50 tonnes in 2026 and 40 tonnes per month in 2027.

Potential for Further Upside

Risks to the bank's price forecast remain skewed to the upside over the medium term. Analysts led by Lina Thomas wrote that gold's share in private investment portfolios remains low. They suggest that recent geopolitical developments could motivate private investors to follow central banks in diversifying their assets, potentially accelerating demand beyond the official sector.