Goldman Sachs has significantly reduced its year-end gold price target by $500, from $5,400 to $4,900 per ounce. This revision comes after the Federal Reserve's first meeting under Chairman Kevin Warsh signaled that rate cuts are off the table for 2026, with potential rate hikes on the horizon. This shift in monetary policy changes the calculus for gold-backed ETF inflows, which Goldman now expects to be lower. Goldman's economists have also pushed back their expectations for U.S. rate cuts to June and December of next year, a delay from their previous forecast of December 2026 and March 2027.
Several other major financial institutions have followed suit in adjusting their gold outlooks. Bank of America, for instance, noted that the increased likelihood of a Fed rate hike this year will restrict gold's short-term rally. Deutsche Bank attributed gold's weakness to the repricing of the Fed's policy path and robust U.S. macroeconomic data. Deutsche Bank's precious metals strategist, Michael Hsueh, warned that gold prices could fall to $3,800 per ounce if the Fed raises rates three to four times.
The consensus among these Wall Street firms highlights the sensitivity of gold, a non-yielding asset, to changes in real interest rates. With rising interest rate expectations, gold's appeal as a macro policy hedge diminishes. However, while tactically cautious for the short term, firms like Goldman Sachs maintain a structurally bullish long-term view on gold, referencing its role in a world of fiscal excess and geopolitical fragmentation. The short-term headwinds are primarily driven by the belief in potential rate hikes and elevated real yields, which could lead to prices settling at $4,400 by year-end if the Fed actively tightens policy. The current gold price is around $4,165 per ounce, making the revised target of $4,900 an increase from present levels.
