Gold Is Forecast to Climb as Central Banks Buy the Precious Metal

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 Goldman Sachs Research.

Goldman Sachs Research forecasts the precious metal will rise to $4,900 per troy ounce by the end of the year. Gold rallied 15% from its mid-July low to around $4,600 per troy ounce as of August 25.

The metal is expected to rise as central banks continue diversifying their reserves and markets scale back expectations for US rate hikes in 2026.

Why is gold rising?

Demand for gold from central banks is a key structural factor underpinning the metal’s rally, according to Lina Thomas, senior commodities analyst in Goldman Sachs Research, and Daan Struyven, co-head of Global Commodities Research.

“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 write.

Central banks have been diversifying their holdings using gold, which is considered less likely to be frozen than reserves held in foreign currencies. They have been buying gold at an increased rate since 2022, when G7 countries responded to the invasion of Ukraine by freezing Russian central bank assets in Europe.

Goldman Sachs Research expects central banks to buy an average of 50 tonnes of gold per month in 2026, up from an average of 17 tonnes per month before 2022.

Central bank purchases accelerated to 100 tonnes per month in June 2026 (on a three-month seasonally adjusted basis) from 66 tonnes the previous month, according to Goldman Sachs Research’s nowcast of central bank activity. China’s central bank was the largest identifiable buyer in the market in June.

Interest rate expectations are another important factor supporting recent gold price increases. 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.

Historically, gold tends to struggle when interest rates rise, as higher rates reduce the appeal of gold relative to yielding assets like bonds.

“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,” Thomas and Struyven write.

The researchers also highlight a range of medium-term factors that could cause the gold price to exceed Goldman Sachs Research’s forecast for 2026. “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.”

Is gold becoming more volatile?

Demand for gold call options is rising as investors turn to the instruments to hedge their portfolios against large-scale changes in government policies. This has the potential to amplify price swings in both directions, Thomas and Struyven explain.

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.

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 forecast for gold to reach $4,900 per troy ounce by the end of 2026 does not incorporate elevated demand for hedges through gold derivatives. This could increase the likelihood that the gold price exceeds the forecast, but it also suggests “greater two-sided volatility” to the gold rally, Thomas and Struyven write.

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