Goldman Sachs has revised its year-end gold price forecast downward by $500 per ounce — from $5,400 to $4,900 — reflecting the growing expectation that the Federal Reserve will not ease rates in 2026.
Analysts Lina Thomas and Daan Struyven indicated that while gold is still expected to appreciate in the second half of the year, the gains are now expected to be less pronounced than earlier predictions, reports Bloomberg.
The revision marks a notable change in tone from one of Wall Street’s most consistently bullish voices on gold. In late 2024, Goldman Sachs correctly predicted a significant rally by advising investors to “go for gold” — among other bullish recommendations. The bank now sees a more modest path ahead.
The Iran war has also played a significant role. Gold prices had dropped nearly 20% since late February due to the US-Israeli conflict with Iran, especially after the Strait of Hormuz was closed, causing oil prices to surge and stoking inflation fears. Gold rose toward $4,200 per ounce on Monday, recouping some of its recent losses as oil prices fell further following reports that the US and Iran had agreed on a route to a final peace deal within 60 days.
“The market enters this week with a cautious-to-recovery bias. The key catalyst is the May PCE print due June 25 — the Fed’s preferred inflation gauge. An upside surprise in core PCE would reinforce rate-hike bets and add further pressure on gold. A softer reading, conversely, could give bulls the opening they need for a short-covering rally,” says Dr. Renisha Chainani, Head – Research at Augmont.
Why Has Goldman Cut Its Forecast?
Two key factors are behind the downgrade. First, Goldman Sachs Research no longer expects the Federal Reserve to lower rates in 2026. David Mericle, chief US economist, has pushed his projection for the final two rate cuts in this cycle to June and December 2027 — moved from December 2026 and March 2027 previously.
Second, the outlook was downgraded due to a reduced forecast for inflows into gold-backed exchange-traded funds, directly linked to the delayed rate cut expectations.
The Warsh Factor
The appointment of Kevin Warsh as the new Fed Chair has added another layer of pressure on gold. Warsh emphasised the Fed’s commitment to price stability — indicating that interest rates may rise rather than be cut in response to inflation. His decision to abandon forward guidance led to negative market reactions, suggesting increased volatility for rate-sensitive assets like gold, as the Fed will now react to incoming data without committing to a specific path.
Last week, the Federal Reserve maintained interest rates but indicated increasing support for hikes this year. Nine of the Fed’s 19 policymakers now project at least one rate increase this year, with markets increasingly betting on a hike as early as September.
Goldman Sachs executives, including vice chairman Rob Kaplan, have indicated that the Federal Reserve might need to raise interest rates as early as September if inflation continues to be high, according to an interview with Bloomberg Television.
If the Fed raises interest rates, analysts predict that demand for gold as a macro policy hedge may decrease, potentially leading to prices of $4,400 by year-end — well below Goldman’s revised base case of $4,900.
Some Bright Spots for Gold
Not everything is working against gold. Several supportive factors remain in play. Central bank purchases continue to provide a floor for gold prices — with 50 tonnes expected monthly this year and 40 tonnes next year.
The World Gold Council estimates that gold purchased in the first quarter of 2026 actually increased over the fourth quarter of 2025 — 244 tonnes in Q1 2026, up from 208 tonnes in Q4 2025.
And not all Wall Street banks are as cautious as Goldman. J.P. Morgan Global Research is not giving up on gold just yet — projecting an average price of $6,000 per ounce by the end of Q4 2026, rising further to $6,300 per ounce by the end of 2027. That is a significant divergence from Goldman’s $4,900 target — and leaves investors with two very different views to weigh.
Disclaimer: This article is for general informational purposes only and does not constitute investment, financial, or trading advice. Gold prices are subject to significant market volatility driven by geopolitical developments, monetary policy changes, and currency movements. Past performance is not indicative of future returns. Readers are strongly advised to consult a SEBI-registered investment advisor or qualified financial professional before making any gold-related investment decisions.
