Key points:
- As the US dollar strengthens, gold prices test the $4,000 mark
- Goldman Sachs cuts its year-end forecast to $4,650
- Fed decision threatens the prospects for a short-term rebound in gold prices
On Tuesday, October 27th, gold prices fell to $4,000 per ounce due to the strengthening of the US dollar and the high yields on US Treasury bonds, which put pressure on such precious metals before the release of the Federal Reserve's interest rate decision.
According to Reuters, spot gold fell by 0.4% to around $4,000.52; the December delivery contract fell by 0.6% to $4,014.40.
Despite gold prices testing $4,000, Goldman Sachs remains optimistic about further upside potential
According to a report on September 23, Goldman Sachs analyst Lina Thomas lowered the firm's fair value estimate for the end of 2026 from $4,900 to $4,650 after the Federal Reserve's interest rate hike in September.
The revised target still implies a potential upside of about 16% from the $4,000 level. However, to achieve this rebound in the remaining months of 2026, there needs to be a significant reversal in market sentiment.
The target of $5,400 by the end of 2027 remains unchanged, with the rationale being that central bank gold purchases and diversification of reserves provide long-term support for gold prices.
This outlook continues Goldman Sachs' previous forecast, which is that there will be a sustained demand for sovereign assets and an increasing interest among investors to use gold as a hedge against policy uncertainties.
Goldman Sachs research also pointed out that official demand was exceptionally strong, with estimates showing that central banks around the world purchased 79 tons of gold in August.
However, as recently reported by Coinpaper, despite the central bank's continuous purchases, gold prices have still fallen as investors re-evaluate interest rate prospects.
The strengthening of the US dollar and the risk of the Federal Reserve raising interest rates continue to suppress gold prices.
On Tuesday, the US dollar rose by about 0.3%, reaching a two-week high, making gold priced in dollars more expensive for international buyers.
At the same time, U.S. Treasury yields remain high, and gold also faces competition from yield-bearing assets.
The market generally expects that the Federal Reserve will keep interest rates unchanged on October 28. However, persistent inflation and oil prices near $116 have raised market expectations for further policy tightening.
According to Reuters, traders are pricing in a 82% probability of a rate hike in December.
This also explains why, despite ongoing geopolitical uncertainties, gold prices are still under pressure. Coinpaper previously analyzed that rising oil prices would drive up inflation expectations, thereby reducing the attractiveness of gold.
China's continuous increase in gold holdings has provided structural demand for the market, but central bank purchases of gold cannot guarantee price stability in the short term.
Gold price forecast: Can XAU / USD return above $4,100?
The current technical question is whether the gold price can hold above $4,000.
If it continues to fall below this level, and with the increased selling pressure after the Fed's decision, gold prices could further decline to $3,950, followed by $3,900.
On the contrary, if the gold price reclaims $4,050, it indicates that the pressure has eased; if it breaks through $4,100 further, it could reopen the range between $4,150 and $4,200.
Morgan Stanley previously regarded $4,000 as a support level, on the grounds of physical demand and the potential decline in bond yields.
At the same time, Citibank's previous forecast of $4,500 indicated that there were differences in predictions among different institutions within their respective time frames.
