Rate hikes don't change the bullish logic! Goldman Sachs: Short-term rally expected to slow, but maintains forecast of $5,400 by end-2027

The textbook response to a Fed rate hike is simple: bond yields rise, the dollar strengthens, and goldwhich pays no interest to its holderslooks comparatively less attractive. That is exactly what just happened, but one of Wall Street's largest banks is telling clients: don't abandon this trade just yet. Goldman Sachs has spent more than a year defending its bullish gold view through rate cuts, rate hikes, and everything in between. Its latest report shows the bank still believes the metal has considerable upside aheadeven as the Fed is now directly working against it. **After the Rate Hike, Goldman Sachs Remains Bullish on Gold** In a report published on September 18, Goldman Sachs maintained its bullish view on gold, telling investors that a Fed rate hike should slow the rally rather than derail it entirely. The report was released after the Fed's September 16 decision, and Goldman economists now expect one more hike in October. Analyst Lina Thomas reiterated the bank's forecast of $5,400/oz by end-2027, holding to that target at a time when the rate outlook has become less favorable for gold. She lowered her end-2026 fair value estimate from $4,900/oz to $4,650/ozstill well above the recent spot price of around $4,350/ozwhile noting that most of the impact of the tightening cycle has already been priced into exchange-traded fund (ETF) demand. Despite the near-term downgrade, Thomas's long-term view is unchanged. She said the Fed could still cut rates three times between September 2027 and March 2028, with the terminal rate unchanged from Goldman's prior assumptions. This framework is consistent with the overall tone of the bank's report. **Central Bank Gold Buying Remains an Important DRIVE** Thomas wrote that Goldman continues to expect gold to "grind higher" in the near term, and believes stronger-than-expected central bank buying should offset the remaining drag from higher rates. For Goldman's overall forecast, the near-term rate noise matters far less than one structural force: central banks are buying physical gold at a pace far above historical norms. Purchases are currently running at about 91 tonnes per month, well above the pre-2022 average of just 17 tonnes per month. And Goldman attributes almost all of the 23% gain it expects through end-2027 to this buying. This pattern is not new in this cycle. The Goldman commodities team has repeatedly pointed to sustained central bank buying as the pillar of its bullish thesiseven when short-term catalysts such as Fed policy or ETF flows pointed in the opposite direction. Within this broader trend, China has been a particularly steady buyer. The People's Bank of China extended its streak of consecutive gold purchases to 15 months in January, and has continued to add since, reaching 22 straight months by August. This is part of a broader picture of emerging-market reserve diversification, which Goldman analysts describe as a key structural driver of this rally. Goldman also links part of the demand to what it calls the "debasement trade"a reflection of 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 reportedly structural rather than tactical, which is why Goldman does not expect them to be unwound quicklyeven as short-term rate expectations swing back and forth. **A Volatile Forecast** Over the past year, Goldman's price targets have undergone considerable shifts, coinciding with a genuinely turbulent period for gold and Fed policy. As early as October 2025, the bank was setting a Q4 2026 gold target based on expectations of three more rate cuts before early 2026. Over time, the target kept climbing: in January, Goldman raised it to $5,400; by April, the bank maintained that target. At the time, it also expected Western ETF holdings to rise as the Fed eased policy, while the "debasement trade" continued to grow among investors worried about fiscal sustainability. That optimism hit a wall in JuneGoldman reversed its expectation of any rate cuts in 2026. Stronger-than-expected economic and labor market data, combined with a hawkish shift in Fed rhetoric, led Goldman to push back its previously forecast December 2026 and March 2027 cuts to June and December 2027. Its most recent statement represents the latest step in this back-and-forth: cutting the near-term 2026 estimate while keeping the longer-term 2027 target unchanged. This pattern is consistent with how Goldman has navigated surprises in this cycleadjusting the timeline without abandoning its underlying thesis. **What Should Investors Watch Next?** Thomas noted that the risks to her forecast remain skewed to the upside rather than the downside. She pointed out that market demand for gold as a macro policy hedge remains strong, meaning that if prices continue to rise, bullish option positioning could provide another source of upside. But that does not mean Goldman is entirely ignoring downside risks. Thomas explicitly warned that "a more hawkish Fed policy path could trigger a sharper market correction than usual," and that even within the overall bullish framework, greater two-way volatility could lie ahead. This cautious note echoes the base case Goldman laid out earlier this year. For investors watching from the sidelines, the point is not to fixate on a single price target, but to track the same factors Goldman has been focused on all year: Fed policy surprises out of Washington, central bank purchase volumes published by the World Gold Council, and how much of the debasement trade can persist once rates finally do start falling in earnest again.