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Gold prices experienced a dramatic swing this past week, prompting Goldman Sachs to revisit and reaffirm its bullish outlook for the precious metal heading into 2026. Following a meteoric rise of more than 50% year-to-date to all-time highs near $4,400 per ounce, gold suffered its worst single-day plunge in over a decade, dropping 6% on October 21. While the metal recovered partially due to strong buying interest, including from retail investors and institutional “gold bugs,” it still ended the week 3.5% lower, raising questions about whether gold's historic rally may be nearing exhaustion.
Goldman Sachs, however, remains unfazed.
In a note to clients, Goldman Sachs analysts described this pullback as a “healthy reversal” after an extended rally and reiterated their long-term structural bullish view on gold. Citing powerful undercurrents of demand led by central banks, exchange-traded funds (ETFs), and long-term institutional investors, the bank revised its 2026 gold price target to $5,055 by year-end, with gold forecast to average $4,275 over the year. Their Q1 2026 target sits at $4,440 per ounce.“After a period of heavy inflows and extended momentum, a reversal and digestion is healthy for gold and doesn’t change our multi-year structural bullish view,” Goldman analysts Lina Thomas and Daan Struyven wrote.
Gold is on track for an exceptional 2025, having risen more than 55% so far, its strongest annual performance since 1979. Over the last five years, gold's performance reflects a powerful cyclical and structural shift in investor behavior:
Analysts polled by Reuters now expect gold to average $3,400 in 2025, rising to $4,275 in 2026, marking the first time forecasts for the yellow metal have exceeded $4,000 across an entire calendar year.
Goldman Sachs, for its part, sees continued upside in the market. Their updated outlook is grounded in three main pillars that indicate a sustained, if not accelerating, demand for gold. First, they project sustained central bank purchases, averaging around 760 tonnes annually in both 2025 and 2026, which is significantly higher than the pre-2022 average of 400 to 500 tonnes. Additionally, they anticipate that ETF inflows will total roughly 360 tonnes, bolstered by more than 268 tonnes added over just the past eight weeks. Finally, there is an expectation of further monetary easing from the Federal Reserve, with three additional rate cuts anticipated by early 2026. Together, these factors provide a strong basis for their positive outlook..
Gold’s resurgence is taking place within a complex and increasingly unstable macroeconomic environment. A growing divergence between weakening labor markets and rising inflation is pressuring the Federal Reserve as it juggles its dual mandate. August unemployment rose to 4.3% the highest since 2021, with layoffs climbing 55% year-over-year, according to Challenger, Gray & Christmas. A separate Resume.org study found that nearly 40% of companies had laid off workers this year, with 35% planning more cuts by year-end.
On the inflation front, tariffs introduced under President Donald Trump have contributed to price increases, with the Consumer Price Index rising to 3% in September from 2.3% in April.
These conditions are fueling broader questions about the U.S. economic trajectory. A weakening U.S. Dollar, down from 109 to 99 on the Dollar Index, and a drop in the 10-year Treasury yield from 4.77% to 4% have made gold more attractive relative to traditional safe havens. Lower bond yields reduce the opportunity cost of holding non-yielding gold, while a weaker Dollar enhances affordability and demand among foreign buyers.
Goldman's note emphasizes the emergence of “sticky, structural buying” by institutions, including central banks, sovereign wealth funds, private wealth managers, and pension funds. These entities are increasingly viewing gold as a core portfolio asset, rather than simply a speculative play or short-term hedge.
Goldman’s analysts also point to persistent speculative interest. Net long positions in futures and options markets remain elevated, particularly on COMEX, where positioning is in the 73rd percentile since 2014. While this raises the risk of tactical corrections, the analysts argue that the long-term structural backdrop remains overwhelmingly bullish.
Conviction buyers such as central banks and ETFs continue to set price direction, and opportunistic buyers in emerging markets are stepping in during pullbacks, establishing a reliable floor under prices. Notably, a World Gold Council survey found that 95% of central banks expect global gold holdings to rise in the coming year, with none anticipating reductions. Additionally, 43% plan to increase their own reserves, the highest level since the survey began in 2018.
Goldman Sachs maintains that the risks to its forecast are skewed to the upside. With continued demand from the official sector and institutional reallocation into gold, even modest increases in exposure could appreciably lift prices in what remains a relatively small global market.
“We maintain our $4,900/toz target by end-2026, supported by continued central bank demand and renewed investment inflows as the Fed cuts,” the bank stated. The combination of monetary easing, persistent economic uncertainty, and a loss of confidence in fiat currencies and policymakers is anchoring gold’s growing role as a reserve asset and portfolio cornerstone.
In the words of David Russell of GoldCore, "The market is no longer responding to short-term shocks but to a deeper loss of confidence in policymakers, currencies, and the financial system itself."As such, while short-term volatility may rattle markets, Goldman Sachs’ structural bullish thesis remains firm: gold is not just having a moment, it is entering a new era.