Funds are flowing in rapidly; Goldman Sachs raises its year-end gold price target to $4,900.

Funds are flowing in rapidly; Goldman Sachs raises its year-end gold price target to $4,900.

Amid the strong surge in gold prices, Goldman Sachs has once again raised its target price for gold.

According to Chasing Wind Trading Desk, Goldman Sachs has sharply raised its forecast for the price of gold by the end of 2026 to $4,900 per ounce, up $600 from the previous estimate of $4,300, an increase of nearly 14%. This adjustment is based on "sticky" capital inflows that have driven gold prices up 17% since August 26, mainly from Western ETF inflows and central bank purchases.

For investors, this means that gold still has 23% upside potential in the next two years, with central bank purchases contributing 19 percentage points and ETF position growth driven by Federal Reserve rate cuts contributing 5 percentage points.

Sticky Capital Inflows Become Key Drivers

Goldman Sachs analysts Lina Thomas and Daan Struyven pointed out that the 17% rise in gold since August 26 has mainly been driven by two major "sticky" capital inflows: Western ETF inflows and central bank purchases. In contrast, more volatile speculative positions have remained relatively stable.

Western ETF holdings have fully reached Goldman Sachs’s implied valuation level based on US interest rates after a sharp increase in September, indicating that recent strong ETF performance is not an overreaction. The renewed strength in central bank purchases also reflects a rebound after the summer lull.

Expectations for the Next Two Years Remain Unchanged

Despite a higher starting point, Goldman Sachs's forecast of a 23% price increase by the end of 2026 remains essentially unchanged. The specific expectations include:

  • Continued growth in central bank purchases: Central bank purchases are expected to average 80 tons in 2025 and 70 tons in 2026, as emerging market central banks may continue to structurally diversify their reserves into gold, contributing 19 percentage points to the 23% price increase by the end of 2026.
  • Fed rate cuts boost ETF inflows: As the Federal Reserve cuts rates by 100 basis points by mid-2026, Western ETF holdings will rise, contributing 5 percentage points to the price increase.
  • Speculative positions gradually normalize: This normalization is expected to have a negative 1 percentage point impact on the price increase.

Upside Risks Remain Significant

Goldman Sachs believes that the upgraded gold price forecast still skews toward upside risk, mainly because diversification by the private sector into the relatively small gold market could push ETF holdings above implied valuations based on interest rates.

Structural growth in central bank purchases mainly stems from the trend of reserve diversification by emerging market central banks following the freeze of Russian reserves in 2022. Goldman Sachs's baseline scenario assumes that the current trend of official sector accumulation will persist for three years.

This forecast adjustment reflects that the gold market is experiencing structural changes driven by central banks and institutional investors, providing a clear allocation signal for long-term investors.

 

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The above content is from Chasing Wind Trading Desk.

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