Central bank gold buying provides a price floor for gold, while short-term rate pressure may be only a temporary disturbance

Overview

This report is a Goldman Sachs precious metals comment focused on global central bank gold buying in May, the short-term pressure on gold from Fed rate pricing, and the medium-term support for gold prices from reserve diversification by central banks and private investors. The report argues that the re-acceleration in central bank gold buying, especially strong buying from China, provides a price floor for gold amid short-term downside pressure from hawkish Fed pricing.

Core views

The core views of the report are: first, central bank gold buying remains a multi-year trend, driven by reserve managers' hedging needs against geopolitical and financial risks as well as a more multipolar international monetary system; second, diversification by emerging market central banks remains the structural anchor for Goldman Sachs' end-2026 gold price forecast of $4,900/toz; third, in the short term gold faces cyclical headwinds from hawkish Fed pricing, expectations of rate hikes later this year amid inflation concerns, and pressure on ETF demand; fourth, these Fed-related headwinds may reverse over time because Goldman Sachs economists continue to expect no rate hikes and anticipate a sustained but delayed easing cycle in 2027; fifth, medium-term forecast risks remain skewed to the upside, as gold still represents a low share of private portfolios and geopolitical tensions could drive further allocation to gold by private investors beyond central banks.

Analysis framework

The report combines Goldman Sachs' central bank gold buying nowcast, the OMFIF reserve manager survey, Fed rate expectations, gold ETF demand sensitivity, and geopolitical scenarios in its analysis. The structural section emphasizes central bank reserve diversification and the multipolarization of the global monetary system, while the cyclical section assesses the impact of hawkish Fed pricing on macro policy hedge demand and rate-sensitive ETF demand.

Methodology notes

• nowcastGS central bank gold purchases nowcast

  High-frequency estimate of central bank gold buying

  Goldman Sachs uses a nowcast to estimate the scale of central bank gold buying in May, measuring buying momentum through both the single-month tonnage and the three-month seasonally adjusted monthly average.

• survey_evidence2026 OMFIF survey

  Survey of reserve managers' motives for buying gold

  The report cites the 2026 OMFIF survey to show that reserve diversification remains the most common reason for buying gold, while the importance of protection against geopolitical risk has increased.

• macro_rates_frameworkFed pricing and rate-sensitive ETF demand

  Cyclical impact of rate expectations on gold demand

  The report views hawkish Fed pricing as a short-term headwind, arguing that it weakens macro policy hedge demand and suppresses rate-sensitive gold ETF demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Gold

  Core asset under research; jointly driven by central bank gold buying, Fed rate expectations, ETF demand, and geopolitical risk.

  Strengths

  Strong central bank buying, ongoing reserve diversification in emerging markets, still-low gold allocation in private portfolios, and geopolitical tensions that could increase safe-haven and diversification demand.

  Weaknesses

  In the short term, pressured by hawkish Fed pricing, expectations of rate hikes later this year, and weakness in rate-sensitive ETF demand.

  Comparison

  The intensity of central bank gold buying in May was significantly above the pre-2022 average, with the three-month seasonally adjusted monthly average at 67 tonnes versus the historical 17 tonnes.

  Risks

  If the Fed actually hikes rates or hawkish pricing persists longer, gold ETF demand and macro policy hedge demand may remain under pressure.

• Gold ETF

  A rate-sensitive channel of gold demand.

  Strengths

  ETF demand could improve if Fed-related headwinds reverse.

  Weaknesses

  Current market pricing for Fed hikes suppresses rate-sensitive ETF demand.

  Comparison

  The report does not provide specific ETF holdings or flow data, discussing ETFs only as a rate-sensitive demand channel.

  Risks

  Higher rates or pressure from rising real yields may continue to weaken willingness to allocate to ETFs.

Key data

• Estimated central bank gold buying in May81 tonnesGoldman Sachs nowcast estimate.
• Three-month seasonally adjusted average monthly central bank gold buying67 tonnes/monthCompared with the pre-2022 average of 17 tonnes/month.
• Pre-2022 average monthly central bank gold buying17 tonnes/monthHistorical reference for the current intensity of gold buying.
• Identifiable gold purchases by China in May48 tonnesThe report states China was the largest identifiable buyer in May.
• 2026 central bank gold buying assumption50 tonnes/monthGoldman Sachs' maintained average monthly purchase assumption.
• 2027 central bank gold buying assumption40 tonnes/monthGoldman Sachs' maintained average monthly purchase assumption.
• End-2026 gold price forecast$4,900/tozThe structural anchor comes from reserve diversification by emerging market central banks.
• OMFIF survey sample74 central banksThe survey was conducted from March to May 2026 and covered all regions.
• Share of respondents selecting protection against geopolitical risk51%Up 11 percentage points from 2024.
• Share of reserve managers who believe the global monetary system is shifting toward multipolarity79%The report believes this supports demand for gold purchases.

Impact & implications

For gold, central bank buying provides a structural price floor, meaning short-term rate pressure may not alter the medium-term bullish logic. For investors, the key debate is whether Fed hike expectations will continue to suppress ETF demand, and whether geopolitical and fiscal sustainability concerns will push private investors to follow central banks in diversifying into gold.

Risks

• Hawkish Fed pricing or actual rate hikes persist longer than Goldman Sachs expects, extending short-term pressure on gold.
• Inflation concerns and energy-driven price pressure may reinforce market pricing for rate hikes.
• Central bank gold buying may slow seasonally during the summer, reducing short-term support.
• If geopolitical risks ease or demand for reserve diversification weakens, medium-term upside risk may diminish.

What to watch

• Subsequent monthly central bank gold buying data, especially whether China's buying continues.
• Whether central bank gold buying re-accelerates after September as Goldman Sachs expects.
• Changes in Fed rate expectations, inflation data, and market pricing of the probability of rate hikes later this year.
• How gold ETF flows and holdings respond to changes in rates.
• Geopolitical events, including Iran and broader tensions, and their impact on private investors' gold allocation.