Gold prices once fell below the 4000 mark, Goldman Sachs: it's just a temporary Whipsaw!

Written by: White55, Mars Finance

On Tuesday, under the pressure of a strong dollar and bleak prospects for a rate cut in the US next month, gold prices fell for the fourth consecutive trading day.

As of the time of writing, spot gold has fallen by 0.5%, briefly dipping below the $4000 mark during the session, and is now quickly rebounding to around $4040.

Marex analyst Edward Meir stated: “The dollar has strengthened slightly today, and some speculative long positions have decreased over the past week. The gold market will now enter a consolidation phase.”

The US dollar index remained stable against major currency exchange rates after a significant rise in the previous trading day. A strong dollar makes gold priced in other currencies more expensive.

Last week, U.S. lawmakers reached an agreement to end the longest government shutdown in the country's history. During the shutdown, the absence of official economic data weakened market expectations for the Federal Reserve to lower interest rates again in December.

Federal Reserve Vice Chairman Jefferson said on Monday that the U.S. central bank needs to “proceed slowly” regarding further rate cuts, which dampens expectations for a cut next month.

This week's market focus will be on the data released by the United States, including the non-farm payroll report for September on Thursday, in search of clues about the health of the world's largest economy.

The ANZ Bank pointed out in a report: “Market expectations for a rate cut by the Federal Reserve next month have dropped from nearly 100% following the September decision to 42% overnight. This has dampened investor interest in gold. However, geopolitical uncertainty, concerns about the sustainability of U.S. debt, the trend of de-dollarization, and structural positive factors such as central bank gold purchases are expected to support investment demand in the medium to long term.”

Goldman Sachs also believes that the catalysts supporting gold will continue to provide support, noting that this round of pullback will be brief, especially considering that central banks around the world are still continuing to buy.

Goldman Sachs stated that the central bank's pace of gold purchases has accelerated and will continue into next year. Analysts wrote: “Our Goldman Sachs instant forecast model estimates that the central bank's gold purchases in September were 64 tons (up from 21 tons in August), and purchases may still continue in November. We continue to view the central banks' significant accumulation of gold as a long-term trend, as countries are diversifying their reserves to hedge against geopolitical and financial risks.”

Goldman Sachs expects that from the fourth quarter of 2025 to 2026, the average monthly gold purchases by central banks worldwide will reach 80 tons. The bank estimates that the Qatar Central Bank purchased 20 tons of gold in September, while the Oman Central Bank bought 7 tons.

Overall, the central bank's buying pace has prompted Goldman Sachs to maintain its forecast that gold prices will rise to $4,900 by the end of 2026. It also stated that if the trend of retail investors incorporating gold into their portfolios continues, gold prices could ultimately be even higher.

Analysts wrote: “The rebound in central bank purchases, coupled with the largest single-month inflow into Western gold ETFs since mid-2022 (112 tons), marks the first time since 2022 that strong central bank demand and such a large increase in ETF holdings have appeared simultaneously in this cycle.”