Goldman Sachs has lowered its end-of-year gold price forecast by $500 at once — to $4,900 per ounce. The reason is that the market increasingly doubts a rate cut in 2026.

Even adjusting for this, the bank still expects gold to rise in the second half of the year — but no longer as strongly as it previously projected. The revision was reported by Goldman Sachs analysts Lina Thomas and Daan Struyven in a research note.

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Why the bank lowered its gold forecast

The main reason for the revision is weaker demand for gold-backed exchange-traded funds. According to the World Gold Council, in May investors withdrew about $2 billion from such funds over the whole month.

A new inflow in May was shown only by European funds. Asian ones lost $1.2 billion over the same month — for the first time since August 2025. In parallel, investor sentiment worsened with a bearish tilt.

Interest in gold ETFs is weakening because markets have started to rate the chances of a Fed rate cut lower. Against this backdrop, Goldman Sachs economists shifted their forecast for the Fed rate to June and December of next year. Previously they had expected a cut in December 2026 and March 2027.

"We still take a positive view of gold's long-term prospects, but in the near term we remain cautious: there is downside risk, since no growth is priced in over the medium term," Goldman Sachs analysts write.

The Fed's hawkish stance

This week the Fed kept the key rate in the 3.50–3.75% range, but the number of supporters of a faster cut grew further. Nine of the regulator's officials now expect at least one cut in 2026.

If the Fed does raise the rate, gold could fall to $4,400 by the end of the year, Goldman Sachs analysts forecast: the metal would then become less attractive as a hedge against political risks. Goldman Sachs vice president and former president of the Federal Reserve Bank of Dallas Rob Kaplan told Bloomberg that a hike is possible as early as September.

Source: BeInCrypto