Goldman holds gold forecast at $5,400 after Fed rate increase

Goldman Sachs' decision to keep its end-2027 gold forecast at $5,400 per ounce after this week's rate hike is notable because it indicates the bank views the Fed's tightening as a factor that will slow the rally, not reverse it. This outlook comes against a typical scenario where higher rates reduce demand for non-yielding assets by making yield-bearing ones more attractive, yet gold edged up on Friday, supported by a weaker dollar and a 1% drop in oil. With 16 of 18 Fed policymakers signaling at least one more increase this year, real yields remain a near-term headwind, but Goldman's unchanged long-term view suggests it sees that pressure as manageable within its bullish thesis, likely backed by ongoing central bank purchases and Middle East geopolitical risks.

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According to Goldman, the Fed's rate hike will slow gold's rally, but the bank is sticking with its $5,400 target.

Summary:

• Goldman Sachs maintained its end-2027 gold forecast of $5,400 per troy ounce despite this week's Fed rate hike, stating that tighter policy (Goldman ditches one and done call, now sees a second Fed hike in October) will likely slow but not stop bullion's rally.
• Gold edged up on Friday, trading above $4,355 an ounce, aided by a 1% decline in oil and a soft US dollar.
• The Fed raised rates on Wednesday and indicated further increases, with updated projections showing 16 of 18 policymakers expect at least one more quarter-point hike by year-end.
• A weaker dollar reduces the cost of dollar-priced commodities for non-dollar holders, while higher rates typically dampen gold demand by increasing the appeal of yield-bearing assets.
• Market participants continue to monitor Middle East developments and the global monetary policy outlook.

On Friday, Goldman Sachs reaffirmed its end-2027 gold price target of $5,400 per troy ounce, despite the Fed's rate hike, arguing that tighter monetary policy will slow rather than halt the rally. The bank's decision stands firm even in an environment that would normally pressure gold, as higher rates make yield-bearing assets more attractive and reduce demand for non-yielding metals, including those seen as inflation hedges.

Gold rose on Friday, trading above $4,355 an ounce, supported by lower oil prices and a weak dollar. Oil dropped roughly 1%, and the dollar stayed soft after pulling back from recent highs, a scenario that reduces the cost of dollar-denominated commodities for foreign buyers and gives bullion a modest boost.

This follows the Fed's rate increase on Wednesday and its signal of more hikes ahead. The Fed's updated quarterly projections indicated that 16 of 18 policymakers expect at least one more quarter-point rise by year-end, a hawkish stance that has drawn attention to real yields and the dollar among gold traders. Despite this, market participants are also watching Middle East events and the overall global monetary policy path, with geopolitical risk offering a counterweight to gold even as the rate outlook becomes less supportive.