Goldman's gold call rests on central-bank buying, not the bounce

Goldman Sachs said on Friday that central banks were probably buying about 50 tonnes of gold a month in March and are likely to average roughly 60 tonnes through 2026. The update, carried in Reuters’ account of the note, implies the market has been underestimating the official-sector bid sitting underneath gold even when momentum traders have backed away.

Bullion commentary typically runs on shorter-cycle logic: Fed cuts, weaker real yields, geopolitical hedging, a fast-money bounce after a selloff. Goldman is betting on something slower. As Finimize summarized the bank’s outlook, the support Goldman describes comes from a buyer base concerned with reserve composition, not from traders chasing the next macro catalyst.

Undercounted London flows sit underneath Goldman’s revision. Whether better measurement is being mistaken for fresh demand — that is the skeptic’s question. An NBER paper on reserve demand and sanctions risk and an IMF note on how FX moves can distort the headline currency mix of reserves both warn the same thing: official portfolios can look as if they are rotating faster than they are if reporting lags and valuation effects are doing some of the work. The new estimate is useful mostly as a clue about the floor under gold, rather than as proof of an uninterrupted march higher.

If the official sector is still buying through volatility, gold’s support hinges less on whether traders like the next inflation print than on whether reserve managers still see bullion as insurance against a world in which dollar assets carry more political baggage than they used to. That question makes this more than another spot-price story.

Why Goldman changed the model

Goldman’s revision came from plumbing, not a dramatic public announcement. Some central-bank demand, the bank said, may have been missed because it was flowing through London in ways that standard tallies did not fully capture. The result: a March nowcast lifted to about 50 tonnes a month and a 2026 run-rate assumption of roughly 60 tonnes. Even before the latest pullback, the market’s demand map was probably incomplete.

In gold, a model revision of this kind carries more weight than in most commodities. Official-sector buyers do not behave like discretionary investors. A central bank adding to reserves has no use for a clean chart pattern or a dovish payrolls surprise. It needs a portfolio reason. The Banker reported that reserve managers’ appetite for bullion has been driven by safe-haven demand and by diversification away from heavy dependence on the US dollar — motivations tied to the longer reserve-management cycle, not to quarterly trading dynamics.

Central banks’ gold purchases are driven by both safe-haven demand and the need to diversify foreign exchange reserves, including reducing dependence on the US dollar.
— Julia Du, The Banker

Every price dip is not automatically a buying opportunity. But when a large class of buyers is not primarily reacting to momentum, the threshold for a deeper unwind rises — and that is the point. Goldman’s $5,400 an ounce end-2026 target, as Finimize noted, is the headline number. What matters more is the mechanism underneath: a slower, steadier bid that can absorb selling pressure and narrow the gap between headline volatility and underlying demand.

The market has been overfocused on the fast variables — real yields, the dollar, futures positioning — while underpricing a slow one: official-sector accumulation. If that diagnosis is right, each sharp selloff reveals more about how impatient private capital has become relative to public buyers than about the trend itself.

China is the cleanest test of the thesis

China provides the cleanest real-time check. Kitco’s report on World Gold Council data said Chinese gold ETFs drew RMB3.5 billion, or about $498 million, of inflows in April, while the People’s Bank of China reported another monthly addition to reserves. Together, the two data points show official and investment demand holding firm even as parts of the physical market softened.

Chinese gold ETFs witnessed their eighth consecutive monthly inflow in April, attracting RMB3.5bn (US$498mn).
— Ray Jia, Kitco / World Gold Council

Jia’s second data point may matter even more than the fund flows.

The PBoC reported an 8t gold purchase in April, its 18th consecutive monthly addition and the highest since December 2024.
— Ray Jia, Kitco / World Gold Council

Whether those ETF inflows are enough to offset weaker jewellery and wholesale buying is the analyst question. Every part of China’s gold market is not equally strong. But the official-sector streak changes the weighting of the evidence: a single eight-tonne month can look noisy; eighteen straight months looks like policy habit. Persistence matters more than the monthly tonnage alone.

World Gold Council data on central banks has shown that official demand was already one of the market’s most reliable support beams before Goldman’s revision. What the China data adds is a more current picture of how that support behaves during flatter price action. Private buyers can hesitate, waiting for a better entry. Central banks keep accumulating if the strategic case has not changed.

Viewed through the regulator-policy lens, the dynamic sharpens. When reserve managers buy bullion to diversify, they are reacting to settlement risk, sanctions exposure and the concentration of reserve assets in a dollar system that has become more openly geopolitical. Their decisions are about reserve architecture, not about inflation calls or rate expectations. Reuters’ earlier report on the PBoC’s buying streak and The Banker both describe gold being treated as a neutral reserve asset rather than a tactical trade.

The floor is not the same as a straight line higher

The skeptic’s objection still belongs on the page. If some of the change in reserve composition reflects reporting gaps or FX effects, the official bid can be real without being as explosive as the bulls suggest. The cleaner conclusion: the lower bound may be firmer than day-to-day price action implies. Gold has not become a one-way market.

For commodities investors, that distinction matters. A market with a durable floor can still correct sharply, but it tends to correct into buyers with a different time horizon. Goldman’s revised model suggests official-sector demand is one reason bullion has been able to hold a structurally richer valuation than older rate-only frameworks would justify.

For central banks, the logic is more direct still. Reserves are meant to insure against extreme outcomes. A metal with no issuer risk and deep liquidity grows more attractive as the political cost of relying exclusively on dollar assets rises. Gold is a hedge whose strategic value may now be underestimated in conventional demand models — it is not a growth asset.

Gold’s next major move may depend more on whether the official sector keeps doing what it has already been doing, at a scale the market may have been undercounting, than on whether traders guess the next Fed sentence correctly. If Goldman is even mostly right about that flow, the real story is not the latest swing in bullion. Central banks are still writing the market’s floor.