Goldman Sachs: If the situation in Hormuz remains volatile, short-term gold will face further liquidation.

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Goldman Sachs adopts a dual-track stance of "structurally bullish, tactically cautious" toward gold in its latest precious metals research report, maintaining its year-end gold price target of $5,400/oz, but also warns that short-term downside risks should not be overlooked.

According to Chase Trading Desk, Goldman Sachs analysts Lina Thomas and Daan Struyven stated clearly in their April 28 report that if turmoil in the Strait of Hormuz persists, combined with further declines in the bond or stock markets, gold faces further liquidation risk, and the near-term price outlook tilts downwards.

Meanwhile, the report qualitatively defines the medium-term risk direction as tilted to the upside — if the Iran incident and broader geopolitical developments accelerate the global diversification of assets into gold and shake market confidence in the fiscal sustainability of Western nations, the upside potential for gold prices will further open up.

Short-term risks tilt downward: liquidation pressure has not fully dissipated

Although previously accumulated gold long positions and outstanding bullish options have been mostly digested, gold prices remain vulnerable in the current environment.

The analysts said that if geopolitical disturbances in the Strait of Hormuz persist, or if further adjustments occur in the bond or stock markets, gold may face a new round of selling pressure. The report shows that current net speculative positions in gold have dropped to about the 41st percentile, a relatively low level, but normalization and recovery of these positions will take time.

The baseline scenario assumes that the private sector will not make further net sales of gold, nor engage in additional accumulation beyond the modest boost expected from Federal Reserve rate cuts.

Year-end target of $5,400 remains unchanged, central bank gold buying is core support

Despite short-term downside risks, Goldman Sachs maintains its year-end gold price forecast of $5,400/oz. The core logic behind this judgment includes three points: central banks continue to advance reserve diversification, normalization of speculative positions from low levels, and an expected 50 basis point rate cut by the Federal Reserve.

The report shows Goldman’s baseline assumption for central bank gold buying is an average of 60 tons per month through 2026. It is noteworthy that central banks bought only about 2 tons in February; Goldman believes this may reflect a temporary pause in buying during periods of extreme price volatility, rather than a trend change.

The results of the central bank conference held on April 23 further confirm this assessment: among 29 surveyed central banks, about 70% expect global gold reserves to increase in the next 12 months, with about 25% expecting them to remain flat; likewise, about 70% of surveyed central banks foresee gold prices stabilizing above $5,000/oz in a year. Moreover, surveyed central banks’ concern about reserves being impaired by gold price declines is significantly higher than their concerns about liquidity constraints.

Medium-term upside catalysts: geopolitics and fiscal confidence in the West

In the medium term, upside risks for gold prices also deserve attention.

The report argues that if the Iran incident and broader geopolitical developments involving Greenland, Venezuela, etc., combine to accelerate global diversification of investor assets into gold and negatively impact market perception of fiscal sustainability in Western countries, gold’s upside potential will expand significantly. In this scenario, renewed demand for call options may become an important driver for prices.

The survey also shows that regarding preferred gold storage locations, London vaults remain the mainstream choice for central banks, but domestic storage in the U.S. has become the second most popular option, reflecting to some extent central banks’ renewed assessment of asset security amid geopolitical risks.

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