Rate Hike Does Not Change Bullish Outlook! Goldman Sachs: Short-term Rally Expected to Slow, but 2027 Year-End $5,400 Forecast Maintained

Zhitong Finance APP reports that the textbook response to a Federal Reserve rate hike is simple: bond yields rise, the US dollar strengthens, and gold—which does not pay interest to holders—becomes comparatively less attractive. This is exactly what just happened, but one of Wall Street's biggest banks is advising clients: don't abandon this trade yet. For more than a year, Goldman Sachs has defended its bullish view on gold amid rate cuts, hikes, and all the swings in between. Its latest report shows the bank still believes there is considerable upside for the metal—even though the Federal Reserve is currently moving directly against it.

Goldman Sachs Remains Bullish on Gold After Rate Hike

In a report published on September 18, Goldman Sachs maintained its bullish outlook on gold, telling investors that while Fed rate hikes should slow this rally, they should not completely derail it. This report was released after the September 16 Fed decision, and Goldman Sachs economists now anticipate another rate hike in October.

Analyst Lina Thomas reaffirmed the bank’s forecast of gold prices reaching $5,400 per ounce by the end of 2027, sticking to this target even as the current rate outlook is less favorable for the metal. She revised her fair value estimate for the end of 2026 down from $4,900 per ounce to $4,650 per ounce—still notably higher than the recent spot price of about $4,350 per ounce—while noting that most of the effects of the tightening cycle have already been priced in due to ETF demand.

Despite the recent downward adjustment, Thomas’s long-term view remains unchanged. She stated that the Fed is still likely to cut rates three times between September 2027 and March 2028, with terminal rates unchanged from Goldman’s earlier assumptions. This framework is consistent with the overall tone of the bank’s report.

Central Bank Gold Buying Remains a Key Driver

Thomas wrote that Goldman Sachs continues to expect gold to “grind higher” in the short term, believing that stronger-than-expected central bank gold buying should offset the residual drag from higher interest rates.

For Goldman’s overall forecast, recent interest rate noise is far less important than one structural force: central banks are buying physical gold at a pace far exceeding historical norms. Purchases currently average about 91 tons per month, far above the monthly average of just 17 tons before 2022. Virtually all of Goldman’s expected 23% price increase through the end of 2027 is attributed to this buying.

This pattern isn’t new in the current cycle. Goldman’s commodities team has repeatedly emphasized that persistent central bank gold buying is the cornerstone of its bullish thesis—even when short-term catalysts such as Fed policy or ETF flows point in the opposite direction.

Within this broader trend, China has been a particularly steady buyer. The People’s Bank of China extended its record streak of gold purchases to 15 consecutive months in January and continued adding, reaching 22 straight months by August. This is part of a broader trend of emerging markets diversifying their reserves, which Goldman analysts describe as a key structural driver of the current rally.

Goldman also ties some of this demand to what it calls the “debasement trade”—reflecting growing concerns among high-net-worth individuals and institutions about long-term government debt levels and the erosion of monetary policy credibility over time. These positions are described as structural rather than tactical, which is why Goldman does not expect them to be liquidated quickly, even if short-term interest rate expectations fluctuate.

Volatile Forecasts

Over the past year, Goldman’s target prices have seen significant variation, coinciding with a particularly turbulent period for both gold and Fed policy. Back in October 2025, the bank set its Q4 2026 gold target based on an expectation of three more rate cuts before the start of 2026. Over time, the target continued to rise: in January, Goldman pushed its target price to $5,400; by April, the bank maintained this goal. At the time, it also expected Western ETF holdings to rise as the Fed eased policy, while the “debasement trade”—driven by investor concerns over fiscal sustainability—continued to grow.

This optimism hit a wall in June—Goldman reversed its expectation of any rate cuts in 2026. Stronger-than-expected economic and labor market data, combined with more hawkish guidance from the Fed, prompted Goldman to delay its previously forecasted rate cuts from December 2026 and March 2027 to June and December 2027.

Its latest statement represents the latest twist in this ongoing adjustment: a downgrade in short-term expectations for 2026 while keeping its long-term 2027 target unchanged. This pattern matches the way Goldman has dealt with surprises in this cycle—adjusting the timeline but not abandoning its core thesis.

What Should Investors Watch Next?

Thomas notes that her forecast risks remain skewed to the upside rather than the downside. She points out that market demand for gold as a macro policy hedge remains strong, which means that if gold prices continue to rise, bullish option positions could offer an additional upside aspect.

But that doesn’t mean Goldman is ignoring downside risk. Thomas explicitly warns, “A more hawkish Fed policy path could trigger more severe market adjustments than before,” and even in an overall bullish framework, future markets could see more pronounced two-way volatility. This cautious stance echoes Goldman’s base expectations from earlier this year.

For observing investors, the focus should not be on fixating on a single price target, but on tracking the same factors Goldman has monitored throughout the year: surprise Fed policy moves from Washington, central bank purchase data from the World Gold Council, and, once rates finally start coming down again, how much of the debasement trade will persist.