JPMorgan Says Gold Could Fall Further Into Early Next Year, Rebound After Rates Peak

JPMorgan warned that gold prices could face further downside into early next year. Federal Reserve rate hikes and tight liquidity are likely to remain a drag until then, though the bank expects a rebound once rates peak.

Bloomberg reported on Oct. 28 that Tang Yuxuan, head of Asia rates and foreign-exchange strategy at JPMorgan Private Bank, said gold still faces downside risk because there is room for further rate increases and liquidity remains scarce.

JPMorgan expects the Fed to raise rates in December and in the first quarter of next year. It also sees the US 10-year Treasury yield rising from just above 5% to 5.25% to 5.5%. Because gold does not pay interest, higher rates raise the opportunity cost of holding it.

Gold fell below $4,000 an ounce last week and remains about 13% below its late-August peak. Tang said there is little technical support below $4,000. He added that when rates are high, liquidity is scarce and investors compete to secure capital. Selling gold to cover losses in other assets is also weighing on prices.

Still, JPMorgan remains bullish over the medium to long term. The bank said gold would form a solid floor once rates peak, and projected prices of $4,500 an ounce by mid-2027 and $5,000 by the end of that year.

Goldman Sachs also acknowledged the possibility of a short-term pullback from further tightening, but maintained its $5,400 forecast for the end of next year, citing central-bank buying and diversification of foreign-exchange reserves. UBS set a $5,400 target for the next 12 months, pointing to central banks' efforts to reduce reliance on the dollar and inflows into gold ETFs.