Goldman Sachs: Fed Rate Hikes to Slow, Not End, Gold's Bull Market

Goldman Sachs is maintaining its bullish stance on gold, arguing that while Federal Reserve interest rate hikes will create near-term headwinds, the underlying bull market for the precious metal remains intact. In a report published Friday, the investment bank reiterated its long-term forecast even as it adjusted short-term expectations.

Rate Hikes and Price Forecasts

Analyst Lina Thomas affirmed the bank's price target for gold to reach $5,400 per ounce by the end of 2027. This forecast holds despite a recent rate hike by the Fed this week and market expectations for another increase in October. Goldman Sachs noted that higher short-term rates will continue to be a drag on gold prices by suppressing demand for exchange-traded funds (ETFs).

Reflecting these near-term pressures, the bank lowered its year-end 2026 fair value estimate for gold to $4,650 per ounce from a previous $4,900. However, this revised target remains above the recent spot price of approximately $4,350 per ounce, as analysts believe much of the anticipated monetary tightening is already priced into the market.

"We expect the impact of monetary tightening to be primarily a slower pace of appreciation in the near term, rather than a lower terminal price for gold," Thomas stated in the report. The bank's long-term view is supported by its expectation that the Fed will still deliver three rate cuts between September 2027 and March 2028.

Central Banks Provide Structural Support

The core structural driver underpinning Goldman's bullish outlook is exceptionally strong and sustained purchasing by global central banks. The report highlights that this demand is more than sufficient to counteract the negative effects of higher interest rates.

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Key figures illustrating this trend include:

• Central banks are currently purchasing an average of 91 tonnes of gold per month.
• This is significantly higher than the pre-2022 monthly average of just 17 tonnes.
• Goldman Sachs projects that this demand will fuel a cumulative price appreciation of approximately 23% by the end of 2027, with nearly all of the forecasted gains attributed to this single factor.

Risks and Market Outlook

While acknowledging increased two-way volatility, Goldman Sachs sees the risks to its forecast as skewed to the upside. The bank noted that demand for gold as a hedge, or call option, against macroeconomic policy uncertainty remains strong. The near-term expectation is for a "volatile upward trend."

However, the report also issued a caution. "A significantly more hawkish Fed rate path could trigger an unusually large pullback in prices," Thomas warned. This remains the primary downside risk to the bank's otherwise positive forecast.