Goldman Sachs analysts have found that significant increases in physical gold purchases by high-net-worth families and in bullish option buying by investors have become important drivers of the rise in gold prices. The private sector, seeking to avoid policy risks, has flooded into the gold market with a 'buy-only, no-sell' pattern, effectively raising the price baseline. Coupled with central banks' continued accumulation and the Federal Reserve's interest rate cuts providing support, gold prices could rise by another 17% amid unresolved macroeconomic risks.
The rules of the game in the gold market have changed. Gold is no longer just a game for central banks; large private sector players are entering, and they are coming to hedge against 'global policy risks.'
According to ZF Trading Desk, Goldman Sachs significantly raised its gold price target for this year from $4,900 per ounce to $5,400 per ounce in its report on January 21. $XAU/USD (XAUUSD.CFD)$ Analysts believe that the key driver of gold's upward trend — the diversification of private sector allocations into gold — has already begun to materialize. This purchasing behavior is aimed at hedging against uncertainties in global macroeconomic policies (i.e., concerns about currency devaluation and fiscal sustainability). More importantly, these are not short-term speculative funds but 'sticky hedges,' meaning buyers will not sell in 2026, effectively raising the starting point for gold prices.
For investors, this means a restructuring of the gold pricing framework: it is no longer just about the pace of Federal Reserve rate cuts but also about the degree of fear among global wealthy families and institutions regarding 'fiscal runaway.' As long as this concern exists, the floor for gold prices will be permanently elevated.
Competition between central banks and private capital for limited physical gold accelerates upward trends.
Goldman Sachs reviewed the trajectory of gold price increases, which recorded gains of 15% in 2023 and 26% in 2024, primarily driven by panic buying from central banks following the freezing of Russian reserves.
However, a qualitative change occurred in 2025, with gold prices surging 67% that year, and this momentum continued into early 2026. The fundamental reason for this acceleration was that central banks were no longer the sole super buyers; they began competing with private sector investors for limited physical gold reserves.
Analysts believe this competition manifests in two dimensions: first, the rebound in traditional Western ETF purchases as the Fed lowers interest rates; second, a surge in demand for new hedging instruments targeting global macroeconomic policy risks (often related to currency depreciation themes).
Goldman Sachs specifically observed a significant increase in physical gold purchases by high-net-worth families and bullish option buying by investors. These capital flows became important incremental drivers of gold price increases, leading to an expanding gap since 2025 between actual gold prices and Goldman Sachs' forecast values calculated using traditional models (ETF flows, speculative positions, central bank purchases).
Goldman Sachs emphasized that this purchasing behavior effectively raises the baseline for gold price predictions. As long as global macroeconomic policy uncertainties (e.g., issues of fiscal sustainability) remain unresolved in 2026, these positions will not easily unwind.
Deconstructing the $5,400 Target Price: Central Bank Gold Purchases Remain the Core Driver
Goldman Sachs forecasts that gold prices will rise by approximately 17% from the average price since January 2026 (around $4,600 per ounce) to the end of 2026.
The composition of this increase is very clear: the continued diversification of reserve structures by emerging market central banks is the largest driving force, expected to contribute 14 percentage points of the increase. Goldman Sachs predicts that the average monthly gold purchases by central banks in 2026 will remain at a high level of 60 tons, significantly higher than the pre-2022 average of 17 tons per month.
Another part of the increase comes from the inflow of funds into Western ETFs. Goldman Sachs assumes that the Federal Reserve will cut interest rates by 50 basis points in 2026, which will stimulate an increase in holdings of Western ETFs, contributing an estimated 3 percentage points to the rise in gold prices.
Notably, Goldman Sachs' model assumes that hedging demand related to global macro-policy risks will remain stable, meaning that this premium will not be reversed. Unlike the rapid unwinding of hedge positions associated with the 2024 U.S. presidential election after the results were announced, the current macro-policy risks (such as debt issues) are considered long-term, leading to extremely 'sticky' gold holdings.
Focus on Two Key Reversal Signals
Despite having significantly raised its target price, Goldman Sachs believes that the risk distribution for gold prices still clearly skews towards the upside.
Analysts believe that if global policy uncertainty continues to escalate, the private sector may further increase its allocation to gold beyond the baseline assumption. The current forecast does not include this additional safe-haven demand. Additionally, due to the existing bullish option structure requiring dealers to hedge, this mechanism mechanically amplifies price momentum when gold prices rise, increasing the sensitivity of gold prices to buying volume (Beta value) from the historical average of 1.7% to around 2%.
As for when to turn bearish on gold, Goldman Sachs has identified clear indicators: due to the lack of price elasticity in gold supply (mined gold accounts for only 1% of the global stock), high gold prices themselves cannot resolve the issue of high prices. A reversal in gold prices can only stem from a collapse in demand.
Goldman Sachs pointed out two potential peak signals:
First, the central bank's demand for gold purchases has continued to decline to pre-2022 levels (an average of 17 tons per month or lower), which typically indicates a reduction in geopolitical risks.
Second, the Federal Reserve shifting from interest rate cuts to rate hikes not only increases the opportunity cost of holding gold but also alleviates investors' concerns about the independence of central banks.
Unless there is a significant reduction in the long-term risks associated with global fiscal or monetary policy, leading to the unwinding of macro-hedging positions, the upward trend in gold prices will be difficult to reverse easily.
Editor/Rice
