Gold Price Soars as Central Banks Boost Demand Amid Fed Rate Hike Uncertainty

Gold prices are expected to reach $4,900 per ounce by the end of 2026, according to Goldman Sachs Research. The firm's analysts, Lina Thomas and Daan Struyven, point to strong demand from central banks seeking to diversify their foreign currency reserves as a key driver of this trend.

Central banks are projected to buy an average of 50 tonnes of gold per month in 2026, up from 17 tonnes per month before 2022. China's central bank was the largest confirmed buyer in June, with sovereign purchases accelerating to 100 tonnes per month on a three-month seasonally adjusted basis.

The analysts also highlight interest rate expectations as another factor driving gold prices higher. As markets scale back expectations of a Federal Reserve rate hike in 2026, demand from investors is starting to recover, Goldman Sachs Research notes.

The firm's forecast does not take into account the elevated demand for hedges through gold derivatives, which increases the upside risk and implies greater two-sided volatility to the gold rally. As investors use gold call options to hedge their portfolios against government policy changes, this can amplify price swings in both directions.