"Strongly support a long-term bullish market for gold! Goldman Sachs raises the global central bank gold purchase forecast, reiterating a year-end gold price target of $5400."

Against the backdrop of continuous reshaping of the global geopolitical landscape and lingering inflation concerns, Goldman Sachs has significantly raised its forecast for global central bank gold purchases, and reiterated its bullish target price of $5400 per ounce by the end of the year. This assessment resonates with the optimistic signals released by several international investment banks recently, injecting a dose of confidence into the gold market which has been volatile for months. Goldman Sachs analysts Lina Thomas and Daan Struyven stated in a report on May 15 that they expect global central bank gold purchases to increase to an average of 60 tons per month by 2026. It is worth noting that this new forecast is based on a substantial methodological revision. According to the revised cumulative estimation framework, the 12-month moving average of central bank gold purchases in March has been significantly raised from the previous 29 tons to 50 tons. Goldman Sachs stated that the previous estimation method was partly based on assumptions about fund flows in UK trade data, but these data may no longer fully reflect market changes, so they have been updated. This means that some central bank gold buying activities that were previously underestimated or overlooked are now entering the market with a clearer picture. In addition, the analysts cited an internal survey indicating that central banks "have a strong fundamental need for gold, and recent geopolitical developments may further strengthen their diversification strategies over time." Although the details of the survey were not further disclosed, this statement suggests that under the current international political and economic situation, the strategic position of gold in official reserves is being redefined. The trend of central bank gold purchases: World Gold Council confirms the official "gold rush" Goldman Sachs' assessment of official sector gold buying activity follows the optimistic report by the World Gold Council. The Council released its Q1 2026 Global Gold Demand Trends report on April 29, showing that global central banks net purchased 244 tons of gold in the first quarter, a 3% increase compared to the previous quarter and the five-year average. Although a few official institutions such as Turkey, Russia, and the State Oil Fund of Azerbaijan have increased their gold sales volumes, global central bank gold purchases continue to show strong momentum. Global gold demand in the first quarter (including off-exchange trading) reached 1231 tons, a 2% year-on-year increase; the total value of demand soared to a record $193 billion, a 74% year-on-year increase. Poland, Uzbekistan, and China were the largest buyers of gold with publicly disclosed data, while data on gold purchases by some central banks were not disclosed. The World Gold Council predicts that annual central bank gold purchases in 2026 will remain between 700 and 900 tons. In the case of China, the central bank has been increasing its gold reserves for 18 consecutive months. As of the end of April 2026, China National Gold Group Gold Jewelry reserves reached 74.64 million ounces, with an increase of 260,000 ounces in April alone, a further increase compared to the previous months. Analyzing Futures pointed out that the accelerated increase in China's central bank gold holdings is driven by three main factors: ongoing evolution of geopolitical risk, good buying opportunities provided by gold price corrections, and favorable conditions for the internationalization of the Renminbi with increased gold reserves. Analysts generally believe that the core logic behind central bank gold purchases is diversification of reserves and de-dollarization. CITIC SEC pointed out that the structural resilience of the trend of global central bank gold purchases remains, with a significant gap between the gold reserves of emerging market central banks and developed countries, indicating that the current cycle of central bank gold purchases is far from over. UBS expects global official sector gold purchases in 2026 to be between 800 and 850 tons, slightly lower than 863 tons in 2025, but still at historically high levels. "Why did the saying 'gold always rises in times of war' fail? The complex game of geopolitical tensions and inflation Since the outbreak of the Middle East conflict, the gold price has been volatile, and the traditional safe-haven logic has faced significant challenges in this round of geopolitical conflict. After hitting a record high of $5626.80 per ounce on January 29, the spot gold price experienced a significant retracement of about $800. As of Monday, May 18, the spot gold trading price was close to $4534 per ounce, well below the record high in January. Why did the traditional logic of "gold always rises in times of war" fail to sustain in this conflict? The answer lies in the fact that there are options on the market that are considered higher in priority than safe-haven assets: inflation and interest rates. Since the outbreak of the US-Iran conflict at the end of February, international oil prices have continued to rise, with the blockade of the Strait of Hormuz causing continuous disruptions to global energy supplies. The US Consumer Price Index (CPI) rose by 3.8% year-on-year in April, reaching a nearly 3-year high, indicating a clear acceleration in inflation trends. Diplomatic negotiations between the US and Iran have stalled due to key disagreements, indicating that oil prices are unlikely to fall from their high levels in the short term, and the inflation situation may deteriorate further over the coming months. The expectation of a rebound in inflation has directly reversed the market's optimistic expectations of continued interest rate cuts by the Federal Reserve. On March 19, the Federal Reserve announced that it would maintain the target range for the federal funds rate between 3.5% and 3.75%. Previously, the market widely expected the Federal Reserve to begin a cycle of interest rate cuts in 2026, which was also a key driver behind the previous rise in gold prices. However, the timing of rate cuts has been continuously deferred, the magnitude of rate cuts has been reduced, real interest rates have been rising, and the market even incorporates expectations of rate hikes. According to CME FedWatch data, the probability of a rate hike by the Federal Reserve within the year has risen to about 40%. The heating up of rate hike expectations poses direct pressure on gold - as a non-yielding asset, gold becomes relatively less attractive in an environment of rising interest rates. Of particular concern, Kevin Warsh officially took office as the Chairman of the Federal Reserve on May 15. He is facing a "stagflation-like" situation a combination of slowing growth and rising inflation, as well as the most severe division within the FOMC in 34 years: among the 12 voting members, 4 voted against the resolution statement. This means that the uncertainty of the monetary policy direction has further increased. At the same time, there has been a structural change in the flow of safe-haven funds. Money has not poured into gold on a large scale, but has instead tended to flow into more liquid and higher-yielding US dollar assets. The global bond market has experienced selling pressure, which has also added extra pressure on non-yielding gold. After the US-Iran negotiations hit a deadlock on May 15, the international gold market saw a significant retracement, and the price of gold quickly plunged below the $4600 per ounce level. Tension between short-term risks and long-term bullish logic: liquidity suction effect concerns vs. visibility of long-term demand It is worth noting that Goldman Sachs is not the only institution that is bullish on gold in the long term. Recently, several top international investment banks have released a series of optimistic forecasts about gold, forming a strong bullish consensus: UBS has set a target price of $5600 per ounce by the end of 2026 for gold, while also forecasting a price of $100 per ounce for silver. Due to valuation adjustments based on market value in the first quarter, UBS has slightly revised its average gold price forecast for 2026 from $5200 to $5000, but still firmly maintains the year-end target price of $5600. ANZ Bank expects gold prices to rise to $5800 to $6000 per ounce by the end of the year, citing the fact that the energy crisis will suppress economic growth, further highlighting the safe-haven and preservation value of gold. Meanwhile, JPMorgan, State Street Bank, and Bank of America all predict that gold will rise to $6000-6300 per ounce by the end of the year. Despite the clear long-term bullish logic, Goldman Sachs remains cautious about the short-term outlook. The report specifically points out that gold is "a natural source of funds for private investors facing liquidity needs - for example, if there is a sell-off in the stock market when interest rates rise and growth expectations weaken." This warning is worth noting. Since May, gold market volatility has exceeded that of the US stock market, indicating a highly fragmented investor sentiment. The World Gold Council also warns that while central bank demand remains structurally solid, recent market fluctuations remind investors that gold could also face the risk of being used for liquidity needs under extreme pressure.