Walsh's "hawkish debut", Goldman Sachs cuts gold price target, "if there is a real rate hike this year, gold prices will fall further"

Affected by the double impact of the Federal Reserve not cutting interest rates in 2026 and the hawkish statement of the new chairman Walsh,Goldman SachsThe target price of gold at the end of 2026 was significantly lowered from $5,400 per troy ounce to $4,900, and the near-term strategy was characterized as "tactical caution". At the same time, it warned that if the rate hike came true, the gold price may further fall to $4,440.

Goldman Sachs' commodity research team clearly listed two reasons for the target price reduction in the report released on June 18th: First, its economists have postponed the last two interest rate cuts of the Federal Reserve until 2027 at the beginning of this month, which means that there will be no more interest rate cuts in 2026, significantly suppressing the demand expectation of interest rate-sensitive gold ETFs; Second, the first FOMC meeting after Walsh took office as chairman of the Federal Reserve released a "hawkish beyond expectations" signal. This statement greatly alleviated the market's worry about the independence of central banks in developed markets, making it difficult for the demand for gold as a macro policy hedging tool to rise as previously expected.

In terms of recent downside risks, Goldman Sachs gave specific stress test estimates: if the Federal Reserve lands two rate hike this autumn, the net selling pressure of interest-sensitive ETF holders is superimposed with the fading demand for macro hedging.Gold could end the year down to $4,440/oz — nearly $500 below the benchmark forecast.The report pointed out that the central bank's continuous gold purchase will provide some buffer, so that the gold price under the above pessimistic scenario is still slightly higher than the current level.

Nevertheless, Goldman Sachs maintains its constructive judgment on gold in the medium and long term. The report believes that the situation in Iran and the geopolitical development around Greenland, Venezuela and other regions may eventually accelerate the diversification of the private sector to gold.By then, there is a possibility that the gold price will break through $6,000/oz sharply in the medium term.

First, the change of interest rate path directly suppresses the demand for gold ETFs.Goldman Sachs economists have postponed the last two interest rate cuts by the Federal Reserve to June and December 2027 at the beginning of this month, significantly behind the previous expectations (December 2026 and March 2027). As the allocation decisions of some gold ETF holders are highly correlated with the trend of the Federal Funds rate, the delay of interest rate cut window puts pressure on this part of demand expectations.

Second, the hawkish statement of the first FOMC meeting led by Walsh exceeded market expectations.Goldman Sachs believes that this signal will limit the market's concerns about the independence of central banks in developed markets in the next few quarters, thus weakening the attractiveness of gold as a macro policy hedging tool. Goldman Sachs had previously expected this part of demand to gradually recover to the level of early January 2026, but now it has adjusted its forecast to basically flat.

At the same time, the report pointed out that Jerome Powell remains a member of the FOMC, and if the Democratic Party wins the Senate in the midterm elections-the predicted market shows that the probability is close to 50%-any new nomination of FOMC members must be approved by the Senate controlled by the Democratic Party. To some extent, the above factors restrict the market's more extreme worries about the independence of the central bank.

The report pointed out that although the previously accumulated excess positions and demand for call options have been mostly digested, Wash's hawkish debut could still trigger a further ebbing of demand for macro policy hedging. The benchmark scenario of Goldman Sachs US economists does not include rate hike, but if the rate hike lands-especially if the market thinks the rate hike is more than the data can support-the demand for gold macro hedging will fade more durably.

Under this scenario (assuming two rate hike landings in the fall of 2026), combined with the net selling pressure of interest rate-sensitive ETF holders,Goldman Sachs estimates that gold prices could fall to $4,440/oz by the end of the year, about 9% below the benchmark forecast of $4,900.This level remains slightly higher than the current price, as the central bank's continued gold purchase can provide some buffer.

According to the latest calculation of Goldman Sachs, the global central banks purchased about 59 tons of gold (without seasonal adjustment) in April 2026, of which China contributed about 24 tons. On a 3-month (seasonally adjusted) and 12-month moving average basis, the current pace of gold purchases is around 50 tonnes per month – a slowdown from 67 tonnes per month in 2024, but still well above the level of 17 tonnes per month in 2022 before Russia's central bank assets were frozen.

The latest survey data of the World Gold Council confirms this trend: up to 45% of the 76 central banks surveyed between February and May this year are expected to increase their gold reserves in the next 12 months, a record; About 90% expect global gold reserves to rise overall, while the rest are expected to be roughly flat. Based on this, Goldman Sachs assumes that global central bank gold purchases remain at 50 tonnes per month in 2026 and fall to 40 tonnes per month in 2027, a factor that will contribute about 9 percentage points to the end-of-2026 gold price forecast.

The report pointed out that the proportion of gold in private investment portfolio is still low at present, and there is much room for improvement. The situation in Iran and other geopolitical developments, including the disputes over Greenland and Venezuela, may ultimately accelerate private sector diversification into gold, and may further reinforce this trend by influencing outside judgments about the sustainability of Western fiscals.

Under an optimistic scenario, if the demand for macro-policy hedging (that is, the demand for gold call options) rebounds to the level of early January 2026,Goldman Sachs believes that the price of gold is expected to surpass $6,000/oz by the end of the year.In addition, the current speculative positions are still at a low level relative to the historical average, and the gold ETF positions are also lower than the reasonable level implied by the Federal Funds rate. The normalization of the two will contribute an additional medium-term increase of about 4 percentage points to the gold price.