(Kitco News) – The Federal Reserve’s hawkish shift has had a large impact on investor positioning, which has forced a reassessment of gold’s short- and medium-term price prospects, but the long-term remains constructive, according to strategists at Goldman Sachs.
Goldman Sachs Research strategists led by Lina Thomas said in a recent note that they have lowered their year-end forecast by $500 per ounce, from $4,650 to $4,150, while slashing their year-end 2027 forecast from $5,400 to $4,800.
Goldman’s base case assumes the Fed’s recent hawkish shift – and another rate hike in December – will restrain investors’ debasement concerns. The bank now expects call-option demand for gold as a hedge against macro policy risks to fall back toward its historical average rather than rising back toward the historically elevated levels from early 2026.
The strategists added that the current setup increasingly resembles 2022 when central banks provided a strong structural bid, but higher interest rates still weighed on investor positioning, producing only a modest rate of price appreciation.
“We retain our longer-term constructive view on structurally strong central bank demand – which drives most of the 15% price upside we forecast by end-2027,” they wrote.
Goldman Sachs expects central bank gold purchases to average 60 tonnes per month through 2026 and 2027, compared with the pre-2022 average of 17 tonnes. Its latest nowcast puts current purchases at 85 tonnes a month on a seasonally adjusted three-month basis.
The strategists noted that emerging-market central banks, and China in particular, are still underweight gold compared to their reasonable long-term allocation projections, while developed-market central banks have stayed on the sidelines, in part because they already hold significant historical gold reserves.
"But the debate is increasingly shifting from whether to own gold to where to store it, pointing to broader concerns around reserve security and cross-country trust," the strategists added.
Goldman Sachs expects further price support for gold to emerge once the Fed starts cutting interest rates in the second half of 2027, with their economists forecasting a series of cuts from late 2027 through early 2028, which will attract renewed interest from private investors.
The strategists said the next three to six months will be challenging for CTAs and macro hedge funds due to the rising Fed funds rate, energy price uncertainty and tight drawdown limits, but longer-term investors seeking gold exposure may find the current correction an attractive entry point.
Goldman also shared a bear-case scenario where the Fed hikes again in March 2027, delays cuts, or raises its terminal rate. Under these circumstances, the strategists said the gold price could rise to only $4,660 by the end of 2027. On the bullish side, renewed concerns about fiscal sustainability could revive demand for gold as a hedge and drive the price above its $4,800 per ounce base case by year-end 2027.
See live precious metals prices for gold, silver, platinum and palladium — in USD, CAD and 12 more currencies.
