Gold prices are on track to reach $4,900 per ounce by the end of 2026, driven by aggressive central bank purchases—led by undisclosed buying from China—and recovering exchange-traded fund (ETF) demand, Goldman Sachs said in a research note.

The bank maintained its bullish base-case target for bullion while warning that positioning in options markets could amplify price volatility in both directions. Central banks accumulated an estimated 44 tonnes of gold in July, well above the pre-2022 monthly average of 17 tonnes, according to Goldman Sachs’ nowcast model. On a three-month seasonally adjusted basis, central bank buying stood at 91 tonnes per month.

China was the primary driver, with Goldman estimating the People’s Bank of China bought 35 tonnes in July—roughly 75% more than official public disclosures indicated.

To account for unreported sovereign purchases, Goldman’s model tracks physical bullion flows through London’s over-the-counter (OTC) market into custodian vaults. The Bank of England’s central bank holdings alone rose by 63 tonnes in July, exceeding outflows from the Federal Reserve Bank of New York.

Price Risks and Volatility

Goldman’s $4,900/oz forecast assumes central bank demand averages 50 tonnes per month in 2026 and 40 tonnes per month in 2027, alongside steady Federal Reserve policy and a rebound in private ETF inflows.

However, analysts noted that elevated demand for gold call options—used by investors to hedge against macroeconomic and geopolitical risks—creates mechanical upside and downside risks:

Bullish Case: Continued strong ETF inflows combined with existing call option positioning could force options dealers to buy underlying metal to hedge short exposure, pushing prices “well above” $4,900.

Bearish Case: If the Federal Reserve resumes interest rate hikes, unwinding hedge positions and triggering ETF outflows, gold could drop to $4,440/oz by end-2026. Goldman noted that ongoing central bank buying would limit further downside.

Goldman expects the Federal Reserve to remain on hold through 2026 as inflation cools, removing a key interest rate headwind for the non-yielding asset.