Precious Analyst Fed Hikes to Slow, Rather than Derail, the Gold Rally

Commodities Research 18 September 2026 | 12:13AM BST

Fed Hikes to Slow, Rather than Derail, the Gold Rally

n We maintain our $5,400/toz end-2027 forecast despite yesterday’s Fed hike and Lina Thomas | our economists now expecting an additional hike in October. While higher rates Goldman Sachs International should continue to weigh on gold prices through ETF demand in the near term, Daan Struyven our economists expect the Fed to deliver three cuts between September 2027 | and March 2028, leaving the terminal forecast unchanged at 3.25-3.5%. We Goldman Sachs & Co. LLC

therefore expect the impact of tighter monetary policy to be felt primarily through a slower near-term appreciation path rather than a lower terminal gold price. We nevertheless continue to expect gold prices to grind higher in the near term and now estimate year-end fair value at $4,650/toz (below our previous $4,900/toz forecast but above the current spot price of ~$4,350/toz), as much of the expected tightening already appears priced into ETF demand, stronger-than-expected central bank purchases continue to offset the remaining drag from higher rates, and call-option demand for gold as a macro-policy hedge has proven resilient. n Continued central bank diversification remains the main structural driver of our constructive gold view, contributing nearly all of our expected 23% appreciation through end-2027. Our central bank nowcast points to purchases running at ~91 tonnes/month on a three-month seasonally adjusted basis, well above the pre-2022 average of 17 tonnes/month. Reflecting this acceleration, we raise our central bank demand assumption to 60 tonnes/month on average through 2026-27, versus 50 tonnes/month in 2026 and 40 tonnes/month in 2027 previously. We continue to view reserve diversification following the 2022 freeze of Russian central bank assets as structural, and recent central bank conversations suggest the appetite for gold remains strong. n We continue to see net upside risk to our gold forecast, but also greater two-sided volatility along the path. Call-option positioning remains around three times historical averages and has proven remarkably resilient despite yesterday’s Fed hike and the relatively hawkish press conference, suggesting that concerns around G10 fiscal sustainability continue to support demand for gold as a macro-policy hedge (Exhibit 5). While our forecast assumes the current call-option positioning persists, it does not incorporate the additional price amplification (“beta”) that the existing elevated call option demand can create through dealer hedging. If gold prices continue to appreciate on the back of structurally strong central bank demand and elevated call-option positioning

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Goldman Sachs Precious Analyst

persists, dealer hedging could mechanically amplify the rally and drive gold prices well above our forecast.

n Conversely, a significantly more hawkish Fed path could generate a sharper-than-usual correction. If the Fed were to deliver three additional hikes by year-end and signal a higher terminal rate, demand for gold as a macro-policy hedge could (partially) unwind as market questions about DM central bank independence fade further. Combined with rate-sensitive ETF holders net selling into higher rates, gold prices could fall toward a near-term floor of $4,070/toz before gradually recovering toward ~$4,200/toz by end-2026, as continued central bank purchases progressively raise the floor under prices.

The authors would like to thank Samuel Jönsson — an intern on our commodities research team — for his contributions to this report.