Goldman Sachs sees gold price at $4,900/oz by year-end, but investors hedging through gold derivatives could drive it even higher

Gold prices will rise to $4,900 per ounce by the end of 2026 amid strong demand from central banks seeking to diversify their foreign currency reserves, while investors using gold derivatives to hedge may be making the yellow metal more volatile, according to Goldman Sachs Research. “Gold is projected to extend its recent gains in the second half of 2026, even as growing use of some derivatives tied to the metal could be making gold prices more volatile,” according to Lina Thomas and Daan Struyven at Goldman Sachs Research. The firm forecasts the precious metal’s price will rise to $4,900 per ounce by the end of the year as central banks continue diversifying their reserves and markets scale back expectations for U.S. rate hikes in 2026. The analysts see central bank demand as a key structural factor underpinning gold’s rally. “We continue to see elevated central bank gold accumulation as a multi-year trend, as central banks diversify their reserves to hedge geopolitical and financial risks, consistent with recent survey evidence,” Thomas and Struyven said. Goldman Sachs Research forecasts central banks will buy an average of 50 tonnes of gold per month in 2026, up from an average of 17 tonnes per month in the years before 2022. According to Goldman Sachs Research’s nowcast of central bank activity, sovereign 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 the largest confirmed buyer in June. Another key factor driving the recent gold price increase was interest rate expectations. “Demand from some investors is starting to recover from a slow first half of the year as markets scale back expectations of a Federal Reserve rate hike in 2026,” the report said. “We expect the Fed-related headwind to abate further, as our economists expect a lower inflation trend to keep the Fed on hold this year,” the analysts wrote. They also highlighted a number of medium-term factors that could drive the gold price above their 2026 forecast of $4,900. “Gold’s share in private portfolios remains low, and recent geopolitical developments—including Iran and broader tensions—may accelerate diversification beyond central banks to private investors, including by weighing on perceptions of Western fiscal sustainability,” the analysts said. Thomas and Struyven explained that demand for gold call options is on the rise as investors use them to hedge their portfolios against large-scale changes in government policies – and this has the potential to amplify price swings in both directions. “As gold rises, it is approaching key strike levels for some call options, forcing options dealers that sold these calls to buy gold in order to hedge their short exposure to the metal, accelerating the rally,” the report noted. “On the other hand, declines in the gold price could prompt dealers to reverse those hedges by selling their gold holdings, driving prices even lower.” Goldman Sachs Research’s $4,900 forecast for 2026 does not take into account this elevated demand for hedges through gold derivatives, which increases the upside risk to their forecast, but also implies “greater two-sided volatility” to the gold rally.