The Fed's new hawkish reality just forced Goldman Sachs to slash its gold forecast by $500

By Nora Redmond

Goldman Sachs reduced its forecast for gold by the end of the year to $4,900 a tonne.

Goldman Sachs cut its forecast for gold for the end of the year by $500 based on expectations that the Federal Reserve is no longer likely to cut interest rates in 2026.

Commodities strategists Lina Thomas and Daan Struyven wrote in a note on Thursday that they now see bullion rising to $4,900 an ounce by December - down from a previous forecast of $5,400.

Gold (GC00) fell about 1.5% to $4,184 an ounce on Thursday, having hit multiple record highs last year as central banks sought to raise their reserves, and investors looked to acquire safe haven assets amid fears of President Donald Trump's tariffs on key imports. A gain of more than 60% last year marked its best annual performance since 1979.

Since the start of the war in Iran, gold has tumbled 15%. The energy spike resulting from the effective closure of the Strait of Hormuz has stoked fears of rising inflation, which would make central banks less likely to cut interest rates and possibly more likely to raise them. As gold offers no yield, the opportunity cost of holding it rises when interest rates increase.

The strategists said their lowered expectations for gold comes after Goldman economists pushed the likelihood of two Fed rate slashes from the December of this year and the following March to June and December of 2027.

Their new forecast is also due to reduced worries regarding the independence of the central bank following a surprising hawkish first meeting led by Chair Kevin Warsh, after nine members of the Federal Open Market Committee projected a hike this year.

They outlined that gold's predicted price boost is partially driven by central-bank demand. While lower than its peak of 67 tonnes a month in 2024, it's still considerably higher than the 17 tonnes a month rate before Russia's assets were frozen in 2022, with purchases currently at a level of around triple that.

The strategists believe geopolitical tensions and conflicts will lead to investors increasing the share of gold in their portfolios.

"Gold's share in private portfolios remains small, and the Iran episode - together with broader geopolitical developments (e.g., Greenland, Venezuela) - may eventually accelerate diversification into gold, including by weighing on perceptions of Western fiscal sustainability," they wrote.

-Nora Redmond

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06-19-26 0755ET