Goldman Sachs Sticks to Bullish Gold Outlook Amid Fed Rate Hikes
Goldman Sachs maintains its optimistic outlook for gold prices despite the U.S. Federal Reserve's rate-hike trajectory, citing strong buying by central banks around the world as a key factor.
The investment bank's analyst, Lina Thomas, points to physical gold purchases by global central banks, which currently average approximately 91 tonnes per month, more than five times higher than the pre-2022 average of 17 tonnes.
The People's Bank of China has been leading the buying trend, purchasing gold for 22 consecutive months through last August.
Thomas also notes that efforts by emerging-market economies to diversify their foreign exchange reserves beyond the dollar into a broader range of assets are supporting gold prices. As concerns grow over currency depreciation tied to expanding government debt and monetary policy uncertainty, high-net-worth individuals and institutional investors are increasingly turning to gold as a means of protecting their assets.
Goldman Sachs maintains its existing price target of $5,400 per ounce for gold by the end of 2027, implying roughly 23% additional upside from current levels. However, the bank has lowered its year-end 2026 fair-value estimate from $4,900 to a range of $4,650 to $4,900 due to the increased likelihood that the Fed will follow its recent rate hike with another increase.
Thomas warns that sustained high interest rates and a more aggressive tightening path by the Fed could trigger a sharp price correction, but she assesses that upside risks outweigh downside risks. Ongoing demand for gold call options as a hedge against macroeconomic uncertainty is expected to push prices higher than currently projected.