Gold's Central Bank Backstop Faces Its Sternest Test in Washington

Gold settled at $4,055.50 an ounce on Thursday, giving back ground as a firmer dollar and rising crude prices revived the inflation narrative that has dogged the metal all autumn. The retreat came barely a day after bullion had touched a two-week high, a move that followed the US midterm elections as the dollar and Treasury yields eased and softer energy costs trimmed inflation worries.

The swing illustrates how tightly gold's short-term path is now tethered to the rates outlook rather than to physical demand. October's US jobs report, showing 165,000 new positions and unemployment at 4.1%, gave the Federal Reserve room to keep its attention fixed on inflation stoked by the Middle East conflict, according to Reuters.

Goldman Trims Its Sights

Goldman Sachs cut its end-2026 gold forecast to $4,150 an ounce from $4,650, pointing to the Fed's more restrictive stance, Reuters reported. The bank also lowered its end-2027 target to $4,800 from $5,400. Even after the revisions, Goldman still projects higher prices further out — just at a lower level than before, leaving investors with an upward path and a stronger policy headwind in the same call.

Citi's read runs along similar lines but with a sharper edge. The bank sees $4,800 by the end of next year, citing the Fed's tighter posture and its effect on positioning. Its near-term caution and longer-run optimism stem from the same source: monetary policy.

Where Citi departs is the Strait of Hormuz. Should disruption there persist, the bank sketched a downside scenario around $3,500 an ounce. The condition matters: a reopening could pull oil lower and make rate cuts easier, while a prolonged closure would remove that relief valve for gold.

Official-Sector Buying Provides the Floor

Heavy central bank purchases have so far kept gold from buckling under rate expectations. The World Gold Council reported net official-sector buying of 321 tonnes in the third quarter of 2026, up 42% from a year earlier.

Physically backed ETFs also drew money. The council logged worldwide inflows of $2.7 billion in October, led by European funds at $1.8 billion. North American funds went the other way, posting outflows of $512 million — a global headline number that masks a split regional picture.

Broader demand is mixed. Global gold demand reached 1,369 tonnes in the third quarter of 2026, while bar and coin demand fell 19% year on year. Total supply also came in at 1,369 tonnes despite mine output hitting a quarterly record of 1,071 tonnes, as less scrap gold flowed back into the market.

The council flags geopolitical risk, fiscal worries and financial-market stress as potential supports through the rest of the year. For now, the tug of war is clear: central bank buying and ETF inflows underpin demand, while the dollar and rate expectations set the price. Any easing in energy costs could lift gold — provided it also softens the policy outlook.