Goldman Sachs: Structurally Bullish on Gold to $5,400, But Warns of Short-Term Pullback

TradingKey - Goldman Sachs ( GS) 's latest precious metals research report on gold ( XAUUSD) price trends presents a "structurally bullish, tactically cautious" dual outlook, maintaining its year-end target of $5,400 per ounce while warning that short-term downside risks warrant caution.

The bank's analysts Lina Thomas and Daan Struyven noted in their latest report that if tensions in the Strait of Hormuz persist, combined with further declines in bond or equity markets, gold could face a new round of selling. The report mentioned that while previously accumulated long positions and call options have mostly been digested, current gold prices remain fragile, and short-term price forecasts lean to the downside.

However, the report also emphasized that medium-term upside potential for gold is noteworthy. If Iranian and broader geopolitical events accelerate global asset diversification into gold while shaking market confidence in Western fiscal sustainability, the upside for gold prices will be further unlocked.

Data shows that current net speculative positioning in gold has fallen to approximately the 41st percentile, a relatively low level, but it will take time for positions to normalize. Under the baseline scenario, the private sector will not continue net selling gold, nor will there be additional buying beyond the modest accumulation driven by Fed rate cuts.

Despite short-term volatility, Goldman Sachs maintains its year-end gold price forecast of $5,400, with central bank demand serving as the core supporting factor.

Survey results from the April 23 central bank meeting corroborate this assessment. Among 29 surveyed central banks, about 70% expect to increase gold reserves over the next 12 months. An equal percentage believe gold prices will stabilize above $5,000 per ounce in a year's time, and central banks' concerns over reserve value impairment due to falling prices far outweigh liquidity concerns.

The World Gold Council's Q1 Gold Demand Trends report, released on the 29th, showed that global central banks made net purchases of 244 tons in the first quarter, higher than the 208 tons in the previous quarter and the fastest pace in over a year. Poland, Uzbekistan, and China were the largest buyers among those that disclosed data.

In the medium term, the evolution of the geopolitical situation and shifts in confidence regarding Western fiscal sustainability are key variables. If events in Iran, alongside geopolitical issues in Greenland and Venezuela, drive global investors to accelerate gold allocations while weakening confidence in Western fiscal sustainability, gold's upside will expand significantly, and a rebound in call option demand could become a major driving force.