Goldman Sachs reaffirms its bullish outlook for gold, projecting prices to reach $4,900 per ounce by 2026, driven by central bank demand and anticipated Fed rate cuts.
On December 18, Goldman Sachs released a research report highlighting "long gold" as a core high-conviction trading strategy. The bank argues that amid geopolitical tensions and the "AI and national power competition" macro backdrop, emerging market central banks will continue purchasing gold to diversify reserve risks. This structural demand, combined with cyclical support from Fed easing, forms a dual-engine driver for gold's upward trajectory.
The report notes that gold prices have already surged approximately 64% in 2025 due to competition between ETF investors and central banks in a tight physical market. Goldman Sachs expects further supply-demand tension as Fed rate cuts of 50 basis points in 2026 accelerate ETF inflows. Analysts emphasize that central bank demand is not only sticky but also significantly exceeds historical averages, providing a solid floor for gold prices.
Beyond its base-case forecast, Goldman Sachs identifies upside risks from potential private investor diversification. The bank estimates that a mere 1-basis-point increase in gold allocations within U.S. private financial portfolios could drive an additional 1.4% price appreciation. This suggests that if private capital expands gold exposure for hedging purposes, the metal's upside potential may exceed current model projections.
**Dual Engines for $4,900 Target: Structural and Cyclical Forces** Goldman Sachs’ commodities research team, led by Daan Struyven and Samantha Dart, maintains its baseline forecast for gold to climb to $4,900 per ounce by December 2026, representing a 14% upside from current levels.
This projection hinges on two key drivers: 1. **Structural demand** from sustained central bank purchases. 2. **Cyclical tailwinds** from Fed-driven financial easing.
While overall commodity index returns may slow due to energy sector weakness, precious metals—as rate-sensitive assets—are expected to outperform in 2026. Notably, as U.S. rates decline, ETF investors (previously net sellers from 2022–2024) are re-entering the market, competing with central banks for limited supply. This "synchronized buying" by both steadfast (central banks) and returning (ETF) investors is a critical price catalyst.
**Central Bank Gold Buying: A New Normal for Geopolitical Hedging** Goldman Sachs details a structural shift in central bank gold accumulation, citing the 2022 freeze of Russian FX reserves as a watershed moment that reshaped emerging markets’ perception of geopolitical risks. To hedge against sanctions and uncertainty, these central banks are accelerating diversification away from dollar assets into gold.
The bank estimates global central banks will maintain robust purchases of ~70 tons per month in 2026—near the 66-ton average of the past 12 months but quadruple the pre-2022 monthly average of 17 tons.
Analysts highlight that emerging market central banks, including China, still hold below-peer gold reserve allocations. Given ambitions for RMB internationalization and geopolitical hedging needs, these institutions retain significant room for further accumulation. Survey data also shows central banks’ gold allocation intentions at historic highs.
**Upside Risk: Private Investor Participation** Beyond central bank demand, Goldman Sachs flags substantial "optionality value" from private sector inflows. Gold ETF allocations in U.S. portfolios currently stand at just 0.17%—6 basis points below 2012 peaks—indicating low crowding.
Modeling suggests each 1-basis-point increase in gold allocations (driven by incremental buying, not price appreciation) could lift prices by ~1.4%. Thus, if private investors broadly adopt gold as a core hedge amid rising geopolitical competition, supply chain risks, or demand for portfolio insurance, price gains could far exceed baseline central bank-driven targets.
Goldman Sachs concludes that gold and commodities offer compelling portfolio insurance value in the current macro environment, particularly when equities and bonds fail to mitigate inflation and growth risks from supply-side shocks.
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