Banks Cut Gold Forecasts as Hawkish Fed Pressure Builds, While Central Bank Buying Remains the Key Support
A growing number of global banks are cutting their gold price forecasts for the rest of 2026, as a more hawkish US Federal Reserve and fading expectations of rate cuts challenge the rally that drove the metal to record highs. Even so, the banks are keeping a positive long term view, supported by continued central bank buying.
Deutsche Bank was the latest to revise its outlook, cutting its gold targets by as much as 22 percent. It now sees the metal at about US$4,300 an ounce in the third quarter, rising to US$4,800 in the fourth, levels still above current prices but a marked step down from earlier, more bullish projections. The bank pointed to weaker investment demand, continued outflows from gold backed exchange traded funds, and gold trading at a discount in the Chinese market relative to US futures, a sign of softer physical demand.
A broad repricing
The revision follows similar moves across the market. Bank of America recently said its US$6,000 an ounce target looks unlikely for now, estimating that the shift from rate cuts toward possible rate increases cuts the odds of further upside by about 50 percent, while keeping a bullish longer term case built on the rising US budget deficit and central bank reserve diversification.
Goldman Sachs cut its year end target by US$500 an ounce to US$4,900, citing reduced odds of US rate cuts in 2026 after its economists pushed back their expectation for a first cut to the middle of next year. The bank still sees gains in the second half but warns of short term downside, noting that in a more hawkish Fed scenario prices could fall toward US$4,400 by year end. Citigroup also lowered its target through the end of August, to US$4,000 an ounce from US$4,300, saying gold has become more sensitive to shifts in US monetary policy expectations.
The World Gold Council echoed the caution. Joseph Cavatoni, a market strategist at the council, said rate expectations and real yields are now the biggest challenge for the metal, with investors preferring to hold bonds or cash in the current environment, which limits short term inflows into gold.
Central bank buying, the key support
Despite the pressure, most institutions agree that central bank buying remains the key support holding up the market. After gold more than doubled over the past three years on the back of official demand, the World Gold Council’s 2026 central bank survey points to resilient official appetite: about 89 percent of respondents expect global central bank gold reserves to rise over the next 12 months, and a record 45 percent expect their own institution to add to its holdings. That demand does not remove short term price risk, but it gives the market a stronger long term base than in previous cycles.
Why it matters for the region
Gold’s path matters for the Gulf, where central banks, sovereign investors, private investors and family offices have been steady buyers as part of reserve management, diversification and wealth preservation. A firmer dollar and a more hawkish Fed cap the near term upside, and because most Gulf currencies are pegged to the dollar, US monetary policy also feeds directly into regional liquidity conditions and asset allocation. The structural drivers the banks highlight, large fiscal deficits in advanced economies and official sector buying, remain supportive over a longer horizon. For regional holders, the picture is one of consolidation rather than reversal, with the Federal Reserve and the dollar set to dominate short term price action.
Outlook
The metal looks set to stay caught between the pressure of higher interest rates and the steady support of central bank demand, an equation that will define its path through the end of 2026. Until the Federal Reserve’s direction becomes clearer, gold is likely to consolidate, with US inflation data and the policy outlook the key signals to watch.
Sources: Deutsche Bank; Bank of America; Goldman Sachs; Citigroup; World Gold Council (2026 central bank survey); Bloomberg.
