Goldman stays bullish on gold as central bank demand seen rising

Goldman Sachs reiterated its year-end gold target of $5,400/oz and raised its central bank buying estimate after revising its nowcast to 50 tonnes per month, versus 29 tonnes previously. The bank now believes central banks bought 66 tonnes in January alone, and expects purchases to average 60 tonnes per month through 2026. The outlook is supported by strong underlying demand and diversification trends, though Goldman flags near-term liquidation risk if higher rates or weaker growth pressure equities.

Analysis

The bigger signal is not simply higher gold demand; it is that the marginal buyer has become less price-sensitive and more strategic. If central banks are still adding on weakness after a major repricing, the market is migrating from a tactical trade into a reserve-management regime, which tends to compress float and makes each dip shallower over multi-quarter horizons. That creates a favorable backdrop not just for bullion but for high-beta gold proxies with operating leverage, especially if real rates stop rising.

The second-order risk is that gold is increasingly crowded as a macro hedge at the same time equity volatility could force de-grossing across portfolios. In that scenario, gold can behave like a source of liquidity rather than a safe haven, meaning the first move could be a washout despite the bullish structural thesis. The key timing distinction is days-to-weeks for liquidation risk versus months-to-years for reserve diversification, and those two regimes can coexist.

Consensus may be underappreciating how much of the incremental demand is effectively price-insensitive and how little above-ground supply can respond quickly. The under-recording issue also implies prior flow models have likely been too bearish on tightness, so systematic shorts or underweights built off stale demand assumptions may be vulnerable. The cleaner expression may be via miners with cost discipline rather than bullion alone, because a sustained move higher in gold price expands margins faster than it expands physical demand.

On the other hand, if geopolitical stress fades and rates stay restrictive, the opportunity cost of holding non-yielding assets rises, which could cap upside until the next policy easing cycle. That makes the trade less about immediate war-premium continuation and more about whether the Fed eventually validates the reserve-diversification bid by loosening real financial conditions.

Key Decisions for Investors

• Add tactical long GLD or IAU on 2-4% pullbacks; target a 3-6 month hold with a stop if real yields reaccelerate, because central-bank bid should dampen drawdowns.
• Prefer GDX over outright bullion for upside convexity over the next 6-12 months; miners should out-earn the metal if gold grinds higher and margin leverage can expand 1.5-2.0x faster than spot.
• Pair trade: long GDX / short a broad market ETF like SPY into any risk-off equity tape; if liquidation hits, gold can wobble, but miners with strong balance sheets should still outperform high-multiple equities on relative earnings durability.
• If willing to express the tail-risk, buy GLD calls funded by selling out-of-the-money calls on a high-beta miner basket; this keeps upside to a structural gold repricing while limiting exposure to a sharp but temporary de-grossing event.
• Avoid chasing momentum in junior miners until the market confirms spot gold is holding above prior highs for several weeks; juniors have the most operating leverage but also the worst financing risk if the metal sells off on liquidity stress.