① Goldman Sachs Research's latest forecast projects that gold prices will rise to $4,900 per ounce by the end of 2026, driven by strong demand from central banks seeking to diversify their foreign exchange reserves; ② Meanwhile, the bank warns that investors' use of gold derivatives for hedging could exacerbate price volatility.
Cailian Press, September 3 (Editor: Bian Chun): Goldman Sachs Research's latest forecast projects that gold prices will rise to $4,900 per ounce by the end of 2026, driven by strong demand from central banks seeking to diversify their foreign exchange reserves. Meanwhile, the bank warns that investors' use of gold derivatives for hedging could exacerbate price volatility.
Gold prices extended the previous day's gains on Thursday as the U.S. dollar and Treasury yields retreated from recent highs, with investors awaiting the release of U.S. nonfarm payrolls data later this week for clues on the Federal Reserve's policy direction. As of press time, spot gold was up nearly 1%, trading at $4,428 per ounce.
Goldman Sachs Research analysts Lina Thomas and Daan Struyven stated: "We expect gold to continue its recent upward trend in the second half of 2026, even though the increasing use of certain gold-linked derivatives may intensify price volatility."
As central banks continue to advance the diversification of their foreign exchange reserves and market expectations for Federal Reserve rate hikes in 2026 subside, the bank predicts that gold prices will rise to $4,900 per ounce by the end of this year.
Central bank demand is a key support
Analysts believe that central bank demand is a key structural factor supporting the current rally in gold prices.
"We continue to view high levels of central bank gold accumulation as a multi-year trend, consistent with recent survey evidence indicating that central banks are diversifying their reserves to hedge against geopolitical and financial risks," said Goldman Sachs analysts.
Goldman Sachs Research expects global central banks to purchase an average of 50 tons of gold per month in 2026, significantly higher than the pre-2022 average of 17 tons per month.
According to Goldman Sachs Research's real-time tracking model of central bank activity, the three-month seasonally adjusted pace of gold purchases by sovereign entities accelerated to 100 tons per month in June 2026, up from 66 tons in the previous month, with the People's Bank of China identified as the largest confirmed buyer.
Interest rate expectations are another key driver.
Another key factor driving the recent rise in gold prices is interest rate expectations. "As the market lowers its expectations for Federal Reserve rate hikes in 2026, demand from some investors is beginning to recover from the sluggishness seen in the first half of this year," the report stated.
Analysts wrote: "We expect headwinds related to the Federal Reserve to further diminish, as our economists anticipate that disinflationary trends will lead the Fed to keep interest rates unchanged this year."
They also highlighted a series of potential factors that could drive gold prices above $4,900 in the medium term. Gold’s share in private portfolios remains low, and recent geopolitical developments—including the situation in Iran—as well as broader tensions, may prompt private investors to further diversify their allocations.
Derivatives hedging may amplify volatility
Goldman Sachs analysts also noted that demand for gold call options is rising as investors use them to hedge their portfolios against potential significant shifts in government policy, which could amplify two-way price volatility.
Goldman Sachs also warned that as gold prices rise, key strike prices for gold call options may be gradually triggered, forcing dealers who sold these calls to buy gold to hedge, thereby pushing prices higher. Conversely, if gold prices fall, dealers may reverse their positions and sell their gold holdings, driving prices down further.
Goldman Sachs Research’s current forecast of $4,900 does not account for this additional demand from hedging via gold derivatives. The firm believes this factor increases the upside risk of gold prices exceeding the target, but also implies that the gold market will face "greater two-way volatility."
Bulls gather momentum
Christopher Louney, Head of Global Commodities Strategy and Middle East & North Africa Research at RBC Capital Markets, recently stated that recent gold price movements indicate that geopolitical instability, global de-dollarization, and concerns over U.S. dollar depreciation are once again in focus, with gold prices now poised to approach the "$5,000 mark."
After taking profits and stepping aside to wait-and-see in May, Schroders' analysts recently announced that they have upgraded their outlook for gold and re-established positions in the precious metal. In its latest multi-asset outlook report, Schroders raised its rating on gold to "positive," citing factors such as robust structural demand, improved speculative positioning, and ongoing concerns regarding inflation, sovereign debt, and currency stability.
Kevin Smith, manager of the $420 million Crescat Capital hedge fund, recently stated that the long-term bull market for precious metals remains intact, with expanding global money supplies and unsustainable government debt ultimately driving gold prices toward $20,000 per ounce.