JPMorgan: Gold Still Faces Downside Risk, May Rebound After Interest Rates Peak

Yuxuan Tang, Head of Asia Rates and FX Strategy at JPMorgan Private Bank, stated that due to persistent liquidity constraints and room for further rate hikes, gold still faces downside risks following the recent sell-off. Gold will find a solid bottom once interest rates peak. It is expected that the Federal Reserve will raise rates in December and in the first quarter of 2027, pushing the yield on 10-year U.S. Treasuries to a peak of 5.25% to 5.5% by mid-year, above the current level of just over 5%. The strengthening yields have weakened investors’ interest in the non-yielding asset gold. However, once the Fed ends its tightening policy, given gold’s enduring appeal as a hedge against economic and policy risks, gold prices may rebound strongly later next year. The gold market remains “quite fragile,” with almost no technical support below $4,000/ounce. During turbulent events such as elections in the U.S. and Israel, gold serves as a stable source of funds compared to other assets, but given the market’s expectation for a higher and later yield peak, it is now difficult to determine the bottom.