Goldman Sachs Reaffirms $5,400/oz Gold Target Despite Rate Hikes

Goldman Sachs has reaffirmed its $5,400/oz year-end 2027 gold target despite recent rate hikes by the Federal Reserve. According to a report from Goldman's Global Commodities Research team, monetary policy tightening will mainly affect gold's near-term price movement rather than altering its terminal value.

The report notes that central bank gold buying and call option demand driven by concerns over G10 countries' fiscal sustainability are providing significant support for gold prices. The current structural wave of global central bank gold buying has led to a substantial increase in the precious metal's demand, with Goldman Sachs tracking a rate of about 91 tonnes/month.

Goldman Sachs economists expect the Fed to implement three rate cuts between September 2027 and March 2028, maintaining their terminal rate forecast at 3.25%-3.5%. The report also highlights that the expected monetary policy tightening has been largely digested by ETF demand, resulting in a weakening marginal suppressing effect on gold prices.

The report's authors caution investors about potential tail risks, including an extreme hawkish path and event-driven volatility leading up to the U.S. midterm elections. In such scenarios, gold prices could see sharp selling, but Goldman Sachs believes that continued central bank buying would eventually raise the price floor.