Gold prices came under renewed pressure after Goldman Sachs lowered its year-end forecast for the precious metal by $500 per ounce, citing a more hawkish outlook from the US Federal Reserve.
The investment bank now expects gold to finish the year at $4,900 per ounce, down from its previous target, as interest rate cut expectations are pushed further into the future.
The downgrade follows a notable shift in monetary policy expectations after Federal Reserve Chairman Kevin Warsh’s first policy meeting signalled that policymakers remain prepared to raise rates if inflation proves persistent.
Rate Outlook Weighs on Bullion
Goldman’s economists have significantly revised their interest rate forecasts.
The bank now expects the Federal Reserve’s next rate cuts to occur in June and December 2027, compared with previous expectations for easing beginning in late 2026.
That change matters because gold does not generate income. When interest rates remain elevated, investors can obtain higher returns from cash, bonds and other yield-producing assets, reducing the relative attractiveness of holding bullion.
Further pressure came from comments following the Federal Reserve meeting, where officials indicated that a rate increase as early as September remains possible if inflation fails to moderate sufficiently.
Gold Pulls Back from Record Highs
Against that backdrop, gold fell 1.7% to $4,152.60 per ounce as investors reassessed the outlook for monetary policy.
The decline represents a significant reversal from the strong rally seen earlier this year when geopolitical tensions, central bank buying and expectations of lower interest rates drove bullion to record levels.
While the metal remains historically elevated, the latest move suggests markets are becoming more cautious about the pace of future gains.
Central Banks Continue to Provide Support
Despite the more cautious tone, Goldman stopped short of turning outright bearish on gold.
The bank continues to expect central bank demand to remain a key pillar of support, forecasting official-sector purchases of around 50 tonnes per month throughout the year.
Central banks have been among the most consistent buyers of gold in recent years as governments seek to diversify reserves away from traditional reserve currencies and strengthen balance sheets amid geopolitical uncertainty.
This structural demand continues to underpin the longer-term investment case for bullion.
Gold Miners Feel the Pressure
The weakness in gold prices also weighed on mining shares.
Endeavour Mining fell 2.7% as investors reacted to both the decline in the gold price and the prospect of a less favourable interest rate environment.
Gold producers have been among the strongest performers during the precious metal’s rally, meaning they are often particularly sensitive to changes in sentiment towards bullion.
Outlook Remains Constructive, But More Cautious
While Goldman still expects gold to appreciate from current levels, the bank’s revised forecast reflects a significant change in tone.
The investment case is increasingly dependent on continued central bank buying and geopolitical uncertainty rather than expectations of imminent monetary easing.
For investors, the key variables now include the trajectory of US inflation, future Federal Reserve decisions and whether central bank demand remains strong enough to offset the headwind created by higher-for-longer interest rates.
The result is a gold market that remains fundamentally supported but faces a more challenging environment than many anticipated just a few months ago.
