Since February, gold's upward momentum has noticeably slowed, prompting many market participants to question whether the current bull market in precious metals has come to an end.

Anthony Kim, Goldman Sachs' global head of metals trading, offers a distinctly different perspective. He believes the current softness in gold prices is merely a temporary consolidation phase within a broader bull market, not the final peak. In his view, gold retains the potential to reach new historical highs over the medium term.

Meanwhile, the Goldman Sachs research team has also published a report forecasting a year-end price target of $4,900 per ounce for gold, while simultaneously flagging the volatility risks posed by gold derivatives. Market attention is now fixed on August's US CPI data, which serves as the most critical inflation gauge ahead of the September FOMC meeting and is scheduled for release on Friday, September 11, at 8:30 PM Beijing time.

Seven-Month Consolidation: Two Key Variables Suppressing Price Action

When asked whether the historical high of nearly $5,600 per ounce reached in late January represents the peak of this gold cycle, Kim responded that, from Goldman Sachs' perspective, this is not the end of the bull market but rather a prolonged consolidation phase. He attributes the seven-month-plus consolidation to two core factors.

The first is the nomination and subsequent confirmation of Kevin Warsh as the new Federal Reserve Chair. Kim notes that the market is still trying to gauge the new chair's policy response framework and leanings, and when combined with ongoing commentary from the Trump administration, it will take time for the market to digest potential shifts in Fed policy.

The second factor is the Iran conflict, which has disrupted energy markets and altered the circulation paths of global central bank reserve funds. Kim explains that in the past, a portion of reserve funds would flow into the precious metals market; now, that flow has been clearly disrupted. Goldman Sachs' trading desks have observed a significant reduction in large trading positions. He adds, however, that central banks' sustained gold purchases remain stable, providing a core support base for prices. In summary, the current phase is merely a consolidation, and the bull market trend will eventually resume, with gold prices expected to reach new highs.

Shift in Treasury Yield Dynamics: Fiscal Concerns Reshape Gold's Pricing Framework

The market continues to debate the opportunity cost issue, with many investors worried that elevated Treasury yields will persistently cap gold's upside. Kim states that over the years, the steady depreciation of fiat currencies relative to gold has become a long-term trend. If fiscal sustainability emerges as the core driver for allocating to gold, the traditional correlation between Treasury yields and gold will break down. In other words, while concerns about fiscal problems may push long-end Treasury yields higher, capital may instead flow into gold as a hedge.

In the short term, the rate-gold correlation still holds, but the long-term pricing logic is undergoing a transformation. Recent policy interventions by the US government have been a major catalyst for this narrative shift. Kim cites examples such as intervention in the USD/JPY exchange rate and the Treasury's increased buybacks of long-dated bonds, both of which alter the bond market landscape. Whenever authorities intervene officially, capital tends to gravitate toward gold as a hedge.

Following the summer months—with the July FOMC meeting, a series of policy interventions, and the Jackson Hole symposium all behind them—Goldman Sachs clients remain highly active. A significant number are positioning in convexity hedge strategies, dynamically adjusting their positions based on economic data. Kim emphasizes that the upcoming August CPI report will be the key data point to watch, as it will directly determine the direction of the September Fed rate decision. How the market interprets the inflation data will dictate gold's short-term trajectory.

Goldman Sachs' Year-End Target: Central Bank Buying Provides a Floor While Derivatives Amplify Volatility

Goldman Sachs research analysts Lina Thomas and Daan Struyven released a report on September 2, projecting that gold prices will continue to climb in the second half of 2026, potentially reaching $4,900 per ounce by year-end. Central bank reserve diversification purchases serve as the core support, while reduced market expectations for 2026 Fed rate hikes will also diminish headwinds for gold.

The report indicates that central banks have maintained a multi-year trend of gold purchases as a hedge against geopolitical and financial risks. Goldman Sachs estimates that global central banks are buying an average of 50 tonnes of gold per month in 2026, significantly higher than the pre-2022 level of 17 tonnes per month. On a seasonally adjusted basis, central bank purchases rose to 100 tonnes per month in June 2026, with a major Asian central bank being the largest confirmed buyer that month.

Additionally, demand for gold call options continues to rise, as investors use derivatives to hedge policy risks, which amplifies gold's two-way volatility. When gold prices rise and approach option strike prices, dealers who have sold call options need to buy gold to hedge their short exposure, further fueling price gains. Conversely, when prices fall, dealers sell their physical gold holdings, exacerbating the decline. The $4,900 target does not yet account for the upside potential from such hedging flows, implying additional upside beyond the target—but also significantly heightened volatility.

Conclusion

Based on Goldman Sachs' outlook, the current phase represents a mid-bull-market consolidation rather than a trend reversal. Expectations around the new Fed Chair's policy and the Iran conflict's disruption of capital flows are the key short-term factors suppressing gold prices, while sustained central bank buying and fiscal pressures across nations provide medium-to-long-term support. Goldman Sachs is bullish on gold reaching $4,900 by year-end, with the $4,000 level serving as a strong support zone, making it suitable for building long positions incrementally during pullbacks.

Investors should remain mindful that gold options derivatives can amplify market swings, and the two-way risk cannot be ignored when trading the volatility.

Spot gold was trading at $4,382.69 per ounce as of 10:57 AM Beijing time on September 9.