Goldman Sachs Commodities Outlook: Central bank gold buying + Fed rate cuts, bullish on gold to reach $4,900 in 2026!

Goldman Sachs reiterates its bullish outlook for gold prices in 2026, targeting $4,900, driven by central bank demand and interest rate cuts.

According to Wind Chasing Trading Desk, on December 18, Goldman Sachs released a research report, listing "going long on gold" as a core high-conviction trading strategy. Goldman believes that under the macro backdrop of geopolitical rivalry and the "AI and national power competition," emerging market central banks will continue buying gold to diversify reserve risks. This structural central bank buying, coupled with cyclical support from Fed rate cuts, forms a dual engine driving gold prices higher.

The report states that in 2025, gold prices have already risen about 64% due to competition in the limited physical market between ETF investors and central banks. Goldman expects that as the Fed continues to cut rates by 50 basis points in 2026, a return of funds into gold ETFs will further tighten supply and demand. Analysts emphasize that central bank demand is not only persistent but also well above historical averages, providing a solid bottom for gold prices.

Moreover, Goldman sees upside risk beyond the baseline forecast, mainly from potential diversified allocations by private investors. According to analysts' calculations, if the proportion of gold in US private financial portfolios increases by just one basis point, it could push gold prices up an extra 1.4%. This indicates that, if private capital expands its gold exposure for hedging purposes, the explosive strength of gold prices may exceed current model expectations.

The Dual Engine for the $4,900 Target: Structural and Cyclical Resonance

According to a report written by Goldman Sachs Commodities Research team members Daan Struyven and Samantha Dart, gold prices will continue to perform strongly in 2026. The bank maintains its base scenario forecast that gold prices will climb to $4,900 per ounce by December 2026, representing about a 14% increase from current levels.

This prediction is based on two core logics: First, structural factors—sustained high demand from global central banks; and second, cyclical factors—financial easing from Fed rate cuts.

The report points out that although overall commodity index returns may slow due to the weakness in the energy sector, precious metals—as an asset class benefiting from falling interest rates—will continue to outperform in 2026. Especially as US interest rates decline, ETF investors, who were net sellers between 2022 and 2024, have started returning to the market, competing with central banks for limited gold supply. The simultaneous resonance of "steadfast buyers" (central banks) and "returning buyers" (ETFs) is key to the price surge.

New Normal for Central Bank Gold Purchases: Hedging Geopolitical Risks

Goldman elaborates in its report on the structural shift in central bank gold-buying behavior. The report sees the 2022 freeze of Russia’s foreign exchange reserves as a watershed moment, fundamentally changing emerging market reserve managers’ perception of geopolitical risk. To hedge against sanctions risk and geopolitical uncertainty, emerging market central banks are rapidly diversifying their reserve assets, shifting from US dollar assets to gold.

Data show Goldman expects global central bank gold purchases to remain strong in 2026, with average monthly purchases around 70 tons. This figure is close to the 12-month average of 66 tons, but is four times the average monthly purchase of 17 tons before 2022.

Analysts especially note that, including China, emerging market central banks' gold reserve ratios are still low compared to global peers. Given ambitions for RMB internationalization and the need to hedge geopolitical risks, these central banks still have significant room to increase gold holdings. Survey data also show global central bank willingness to allocate gold is at a historic high.

Upside Risk: Potential Entry by Private Investors

Besides strong central bank buying, Goldman also highlights the huge "option value" from the private sector. The report analyzes that currently, gold ETFs make up only 0.17% of US private financial portfolios—6 basis points below the 2012 peak—showing extremely low allocation crowding.

Goldman's model estimation shows that each basis point increase in gold allocation within US financial portfolios (driven by incremental investors, not just price appreciation) would boost gold prices by about 1.4%.

This means that, if private investors start broadly using gold as a core hedging tool amid intensifying international competition, rising supply chain disruption risks, and hedge funds seeking portfolio insurance, gold prices may significantly break past the benchmark targets set by central bank purchases.

Goldman believes in the current macroeconomic environment, gold and commodities possess significant insurance value within portfolios, especially when equities and bonds cannot effectively diversify "supply-side shocks" that drive inflation and growth risks.

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