Gold is projected to extend its recent gains in the second half of 2026, with Goldman Sachs Research forecasting the precious metal will rise to $4,900 per troy ounce by the end of the year. The metal rallied 15 percent from its mid-July low to around $4,600 per troy ounce as of August 25, 2026, according to the research firm. Demand for gold from central banks is a key structural factor underpinning the metal's rally.
According to Lina Thomas, senior commodities analyst at Goldman Sachs Research, and Daan Struyven, co-head of Global Commodities Research, central banks continue to see elevated gold accumulation as a multi-year trend as they diversify their reserves to hedge geopolitical and financial risks. Central banks have been diversifying their holdings using gold, which is considered less likely to be frozen than reserves held in foreign currencies. This trend accelerated significantly following 2022, when G7 countries responded to the invasion of Ukraine by freezing Russian central bank assets in Europe.
Goldman Sachs Research expects central banks to buy an average of 50 tonnes of gold per month in 2026, up from an average of 17 tonnes per month before 2022. Central bank purchases accelerated to 100 tonnes per month in June 2026 on a three-month seasonally adjusted basis, up from 66 tonnes the previous month, with China's central bank identified as the largest buyer in the market. Interest rate expectations represent another important factor supporting recent gold price increases.
Demand from some investors is recovering from a slow first half of the year as markets scale back expectations of a Federal Reserve rate hike in 2026. Historically, gold tends to struggle when interest rates rise, as higher rates reduce the appeal of gold relative to yielding assets like bonds. Goldman Sachs Research economists expect a lower inflation trend to keep the Federal Reserve on hold this year, which should further reduce headwinds to gold prices.
The researchers highlight that gold's share in private portfolios remains low, and recent geopolitical developments including tensions involving Iran may accelerate diversification beyond central banks to private investors. This could push gold prices beyond the firm's current forecast. However, growing use of derivatives tied to gold could be making prices more volatile.
Demand for gold call options is rising as investors turn to these instruments to hedge their portfolios against large-scale changes in government policies. As gold rises and approaches key strike levels for call options, options dealers that sold these calls must buy gold to hedge their short exposure, accelerating the rally. Conversely, declines in gold prices could prompt dealers to reverse hedges by selling holdings, driving prices even lower.
Goldman Sachs Research notes that its $4,900 forecast does not incorporate elevated demand for hedges through gold derivatives, suggesting the potential for greater two-sided volatility in gold prices. Source: Goldman Sachs Research
Source: goldmansachs.com