Goldman Sachs cuts year-end gold target by $500, doubting rate cuts

Goldman Sachs lowered its year-end price target for gold to $4,900 per ounce on May 21, 2024, a reduction from its prior forecast of $5,200. This adjustment reflects a diminished expectation for interest rate cuts by the U.S. Federal Reserve this year. The investment bank now anticipates only one 25-basis-point rate cut in December, a significant shift from its previous projection of three such cuts. This change in monetary policy outlook is a primary driver for the revised gold forecast, as lower interest rates typically make non-yielding assets like gold more attractive. Despite the reduced target, the new forecast still implies a 10% upside from current trading levels, suggesting that the bank sees continued, albeit moderated, strength in the gold market. The firm also cited a "less hawkish" stance from the European Central Bank and a "more hawkish" stance from the Bank of England as contributing factors to their updated view on global monetary policy and its impact on gold prices. The analysis highlights the sensitivity of gold prices to central bank actions and inflation expectations.