Goldman Sachs has significantly revised its forecast for gold prices, reducing its December 2026 target by $500, from $5,400 per ounce to $4,900 per ounce. This adjustment is primarily driven by the bank's updated outlook on Federal Reserve monetary policy, as it no longer expects any rate cuts this year. Previously, Goldman Sachs had anticipated rate cuts in late 2026 and early 2027, but now projects the first cuts to occur in June and December of 2027.
The investment bank's revision stems from recent strong U.S. jobs data, which suggests a resilient labor market and removes the urgency for the Federal Reserve to lower rates sooner. David Mericle, Goldman Sachs' chief US economist, stated that the unemployment rate is expected to rise only modestly to 4.4% this year, a decrease from his earlier forecast of 4.6%. This level is considered insufficient to prompt immediate rate reductions by the Fed. Mericle also noted that Fed rate hikes are unlikely, though the probability has increased from 10% to 20%.
Goldman Sachs identifies tariffs, higher oil prices due to Middle East conflicts, and what it describes as overstated demand from artificial intelligence as key factors contributing to elevated inflation. These pressures are expected to keep year-over-year core Personal Consumption Expenditures (PCE) inflation above 3% throughout 2026, only returning closer to the Fed's 2% target in 2027. Despite these headline figures, Goldman Sachs acknowledges that underlying inflation drivers, such as wage growth and rent growth indicators, appear softer, suggesting a potential easing of inflation once these temporary factors subside.
The original gold price target of $5,400 per ounce for December 2026, set just weeks prior, was based on the expectation of increased private investor diversification into gold as a hedge against macro policy risks, mirroring central bank strategies. Goldman Sachs had also anticipated 50 basis points of Fed easing in 2026. However, the updated Fed rate cut timeline directly impacts the attractiveness of gold, leading to the downward revision in its price forecast. The bank's terminal rate forecast remains at 3% to 3.25%, with a potential for a flat path if officials conclude current rates are appropriate.
