JPMorgan Private Bank believes that, with interest rates yet to peak, it remains difficult to confirm a bottom for gold prices. Thin liquidity, coupled with expectations of further rate hikes this year, constitutes the main downward pressure. Chinese consumers have increased their holdings of physical gold, providing some support; however, Indian buyers are delaying holiday purchases due to expectations that the decline will continue, significantly weakening demand-side support. For gold prices to regain upward momentum, multiple conditions must align—namely, a pullback in oil prices, easing inflation, and a weaker U.S. dollar.
Gold prices came under pressure on the eve of the Federal Reserve's interest-rate decision, with the $4,000 mark once again at the center of market attention. JPMorgan Private Bank warned that gold is unlikely to establish a genuine bottom before interest rates peak, and that there is little technical support below $4,000, leaving the market still "quite fragile."
As markets focus on tonight's FOMC decision, spot gold edged lower during Wednesday's session, with intraday losses reaching as much as 0.8%, erasing most of the previous day's gains. Yuxuan Tang, Head of Asia Rates and FX Strategy at JPMorgan Private Bank, stated, "Gold prices will find a solid bottom when interest rates peak—the endpoint of the Fed's current hiking cycle"—while noting that thin liquidity and room for further rate hikes remain the primary downside risks facing gold prices.
The Federal Reserve is expected to hold steady this week, but traders have already priced in the possibility of rate hikes later this year, capping upside for gold. Fed Chair Kevin Warsh faces a dilemma: reassuring markets about inflation while managing the pressure from persistently high energy prices. Notably, stubbornly elevated energy costs remain the primary driver of current inflation, and Thursday's PCE data will further clarify inflation trends and the outlook for interest rates.
JPMorgan: The market is fragile, with scant support below $4,000.
Yuxuan Tang, Head of Asia Rates and FX Strategy at JPMorgan Private Bank, remains cautious about the outlook for gold prices. He noted that after the recent sell-off, gold faces downside risks due to persistently thin liquidity and room for further interest-rate hikes.
"Gold prices will find a solid bottom when interest rates peak," Tang said, adding that the market is currently "quite fragile" and there is little technical support below $4,000 per ounce.
Gold prices recently dipped briefly below the $4,000 mark. Last week, AI‑related stocks came under heavy selling pressure, prompting investors to liquidate gold holdings to offset losses in other assets, pushing gold to its lowest level since mid-July. Since then, tech shares have rebounded as enthusiasm for AI‑driven trading picked up, partially easing the downward momentum in gold prices.
Despite weak technical support, physical buying and bargain-hunting capital have to some extent prevented further declines in gold prices. Chinese households' appetite for gold has continued to strengthen over the past two months— as gold prices have retreated, demand for physical gold among Chinese consumers has picked up.
However, demand dynamics on the Indian side are acting as a counterbalance. According to India's largest precious‑metal refiner, Indian households broadly expect the recent decline in gold prices to persist, prompting them to postpone gold purchases ahead of the festive season—thereby somewhat weakening the support that physical demand provides to gold prices.
OCBC Bank strategist Christopher Wong said in a research report, "Near-term risks still lean toward further consolidation, but demand should provide some cushion once selling pressure subsides."
He also noted that for gold prices to regain more sustained upward momentum, several conditions would need to converge: a decline in oil prices, easing inflation, a weaker U.S. dollar, and a pullback in yields.
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