As gold prices plunge, Goldman Sachs remains "firmly bullish": maintains year-end target price of $4,900, with even "upside risk."

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Although gold prices fell by more than 8% this week at one point, Goldman Sachs still maintains a firm bullish stance.

According to news from the Chasing Wind Trading Desk, on October 22, Goldman Sachs analysts Lina Thomas and Daan Struyven released a research report, reiterating their end-2026 target price of $4,900 per ounce and emphasizing that there is "upside risk" to this forecast.

Goldman Sachs believes that the current selloff is mainly caused by liquidations of speculative positions and spillover effects from the silver market, rather than a deterioration in fundamentals. The true "smart money", including structural buying by central banks, ultra-high-net-worth individuals, and long-term asset allocators, continues to flow in.

Goldman Sachs further emphasizes that due to the revival in demand from large institutional investors, there is even "upside risk" to the $4,900 per ounce target. On Wednesday, spot gold once dropped above the $4,000 mark, but then rebounded with support.

(Wide fluctuations above $4,000 for spot gold on Wednesday)

Structural Buying Supports Logic for Gold Price Rise

In stark contrast to the quick in-and-out of speculative funds, Goldman Sachs stresses that the long-term bullish trend in gold is still strongly underpinned by "sticky" structural demand during September and October.

Goldman Sachs points out that these "sticky" capital flows mainly come from:

Seasonal central bank purchases: After a quiet summer (central bank purchases in August were only 21 tons), seasonal buying by central banks may rebound in September and October, consistent with the acceleration trend after summer in previous years.

Strategic allocation by ETFs and ultra-high-net-worth individuals: Driven by expectations of Fed rate cuts and the need for portfolio diversification, gold ETFs will register fresh inflows.At the same time, based on communication with clients, Goldman Sachs understands that physical gold purchases by ultra-high-net-worth individuals may also have increased in September and October. These capital flows are usually slow and long-term, and are not fully reflected in ETF data.

Goldman’s model shows that a firm purchase of 100 tons (including central banks, ETFs, and net managed funds) can cause gold prices to rise by 1.5%-2%. In August, holdings by these participants increased by 154 tons, matching the rise in gold prices and confirming the model’s validity.

Rising Institutional Investor Interest Brings Upside Risk

Based on the strong support of the above structural demand, Goldman Sachs reiterates its optimistic outlook for gold prices, maintaining the target price of $4,900 per ounce by the end of 2026.

The report further reveals an even greater potential driver for gold prices in the future, namely the continued entry of major long-term capital allocators.

Goldman Sachs notes that the recent speed of ETF inflows and client feedback indicate that many long-term capital allocators, including sovereign wealth funds, central banks, pension funds, private wealth, and asset management firms, are planning to increase gold as a diversified allocation in their strategic portfolios.

A study of 13F filings shows that as of 2020, about 70% of U.S. institutional investors had no gold exposure, and even among those with exposures, the average allocation was below 2%.

Such institutions usually require several quarters of approval cycles, meaning demand will continue to be released over the coming quarters. Goldman Sachs specifically emphasizes that this brings significant “upside risk” to their $4,900 target price.

In conclusion, the report states that in the context of rising global macroeconomic uncertainties (including concerns about fiscal issues), if these large institutional investors reallocate even a “moderate” proportion from their massive global bond and equity investments to the relatively small gold market, it could have a huge boosting effect on gold prices.

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