The logic of the gold market is undergoing a significant "return". The latest research from JPMorgan Chase reveals a cold market reality: the pricing power of gold has returned to the hands of the Federal Reserve.

On July 4, according to the chasing trading desk, JPMorgan Chase pointed out in its latest precious metals research report that as the purchasing intensity of other demand sectors has cooled down across the board, interest rate-sensitive gold ETF capital flows have regained the marginal pricing power of gold prices - the negative correlation between gold prices and U.S. real interest rates has made a strong comeback after being dormant for several years. This means that the rise and fall of gold once again depends on a core variable: the next move of the Federal Reserve.

JPMorgan Chase lowered its forecast for the average price of gold in the third quarter to US$4,300 per ounce and in the fourth quarter to US$4,500 per ounce, a significant decrease of 20% to 25% from previous expectations. This means that the early "brainless bullish" phase driven by risk aversion and central bank buying spree has ended.

Although the price of gold has seen a technical rebound from the US$4,000/ounce level, the bank clearly pointed out that the near-term risks are still biased to the downside - once the summer economic data is hotter than expected and the Federal Reserve is forced to raise interest rates ahead of schedule, the price of gold may fall below US$4,000, triggering a technical sell-off and testing the range of US$3,500 to US$3,600.

At the same time, JPMorgan Chase maintains its long-term bullish stance on gold, predicting that with the structural return of central bank gold purchases and physical demand in 2027, gold prices will restart their upward trajectory, with the annual average price expected to rise to $4,775 per ounce.

In terms of other precious metals, silver is experiencing a fundamental switch from "tight supply" to "balancing". The gold-silver ratio is moving closer to 70 to 75. Silver prices are expected to fluctuate in the range of 62 to 65 US dollars per ounce; platinum has touched South African supply near 1,600 US dollars per ounce. The key incentive price at the end of the year is expected to rise to US$1,800 by the end of the year and US$1,950 by the end of 2027 as gold stabilizes. Palladium continues to be under pressure under the pressure of eroding demand for electric vehicles. After it is expected to rise to US$1,350 by the end of the year, the average price for the whole year of 2027 will remain at about US$1,300.

ETF capital flows regain pricing power: gold and real interest rates are once again "bound"

To understand the core of the current gold market, we must first clarify a period of history.

Before 2022, gold prices are highly negatively correlated with U.S. real interest rates - as real interest rates rise, the opportunity cost of holding interest-free gold rises, and ETF holders and futures investors tend to reduce their positions. This logic is simple and stable, and has dominated the market for more than ten years.

After 2022, this relationship was broken. During the Fed's aggressive interest rate hike cycle, ETF holdings outflowed significantly, but the explosive growth in the central bank's gold purchase demand not only made up for this gap, but also liberated gold from the "shackles" of real interest rates. Since then, with the rise of "currency devaluation trades" in 2025, retail physical demand, the rapid expansion of Asian ETF holdings, and the influx of momentum-driven funds have jointly pushed gold prices to historical highs.

However, since March 2026, this pattern has reversed again. The initial deleveraging triggered by the conflict between the United States and Iran, combined with the tough hawkish signal released by the new Federal Reserve Chairman Warsh after taking office, caused other demand sectors to collectively "shut down":

• India: In order to protect external accounts, the government raised import tariffs and tightened import restrictions, causing physical demand to shrink significantly;

• China: Domestic gold premiums remain low, reflecting weak retail demand;

• Central Bank: Although net buying resumed in April and May, the intensity became obviously cautious;

• Retail investors: After Wash reiterated his determination to fight inflation, the "devaluation trade" narrative cooled down, and funds turned to chasing new themes such as AI chips.

The overall silence on the demand side has made interest-rate-sensitive ETF capital flows the only active marginal force. Since the end of February, global gold ETFs have had a net outflow of about 128 tons (a decrease of about 3%), which is basically consistent with the historical correspondence of the US 10-year real interest rate rising by about 50 basis points.

But the actual decline in prices far exceeds what can be explained by ETF outflows - the sensitivity of gold prices to real interest rates is even more severe than the old system before 2022: for every 1 basis point increase in real interest rates, gold prices fall by about US$20, and the cumulative decline exceeds 20%.

JPMorgan Chase believes that this "excessive sensitivity" reflects the current extreme malaise of other demand sectors - their absence not only amplifies the impact of real interest rates, but also compresses the support base for gold prices.

Fed path: Patience is golden, but upside is under pressure

JPMorgan Chase’s baseline forecast is that the Federal Reserve will remain on hold this year and postpone the first interest rate hike to the third quarter of 2027. However, the market's pricing is already ahead of the curve - the OIS forward market is currently almost fully pricing in one rate hike during the year, and expects a cumulative rate hike of nearly 40 basis points by April 2027, which is earlier and more aggressive than JPMorgan's benchmark.

Even if the Fed ends up being as patient as JPMorgan expects, the problem remains: the upward slope of the OIS curve (i.e., where the market prices the next move as a rate hike) will be quite sticky. The reason is that the U.S. labor market has been strong recently, new Chairman Warsh has taken a tougher stance on inflation, and the 10-year U.S. Treasury yield is still more than 20 basis points below the fair value implied by the model, which means there is room for further upside in medium-term interest rates.

In this context, unless employment or inflation data weaken significantly, the market will continue to move forward the timing of the Fed's interest rate hikes, rather than significantly lifting hawkish expectations. This "continued upward sloping OIS curve" will act like a hat, suppressing the recovery of ETF holdings and suppressing broader investor gold demand.

Based on the latest real interest rate forecast, JPMorgan Chase has significantly lowered its 2026 global gold ETF flow forecast from the previous net inflow of approximately 400 tons to a net outflow of approximately 50 tons (as of June 26, net inflows of approximately 19 tons were still recorded during the year).

Short-term downside risks are significant, but long-term logic remains unchanged

For short-term trends, JPMorgan Chase clearly pointed out that the risk balance of the current baseline forecast tilts downward, mainly coming from two paths:

• Path 1: The Federal Reserve is forced to raise interest rates ahead of schedule.

JPMorgan Chase interest rate strategists believe that the interest rate hike cycle from 1999 to 2000 is the closest historical analogy. At that time, the Federal Reserve raised interest rates by about 50 to 100 basis points cumulatively. If the market begins to price in this scenario, medium-term U.S. bond yields may rise again by about 50 basis points, and gold prices will most likely fall below $4,000 per ounce and trigger a technical sell-off, with the target range pointing to $3,500 to $3,600.

• Path 2: The U.S. dollar unexpectedly strengthens.

JP Morgan foreign exchange strategists believe that the shadow of "American exceptionalism" is reappearing. The more critical risk is that if artificial intelligence is used more widely as a geopolitical lever, the growth divergence between the United States and other economies will further expand, pushing the U.S. dollar out of a stronger market and creating additional pressure on U.S. dollar-denominated gold.

Despite a more conservative near-term outlook, JPMorgan has not abandoned its long-term bullish stance on gold. The report emphasizes that the "devaluation trade" has not died, but has been temporarily obscured by the narrative of hawkish monetary policy.

The two major structural forces supporting long-term bullishness remain:

• Central Bank Gold Purchases: Net purchases have resumed in April and May, and China’s gold import data remains strong (even if domestic retail demand is weak, it also implies that accumulation at the official level is still continuing). JPMorgan Chase has slightly lowered its forecast for global central bank net gold purchases in 2026 from 640 tons to 600 tons, but the strategic logic of long-term accumulation has not changed.

• Return of physical demand: Once India's import restrictions are lifted, it will trigger a concentrated release of compensatory demand; the cyclical recovery of physical demand in Asia will also provide support for gold prices.

JPMorgan Chase predicts that as the above-mentioned structural forces regain strength in 2027, gold prices will rise quarter by quarter: US$4,600 in the first quarter, US$4,700 in the second quarter, US$4,800 in the third quarter, and US$5,000 in the fourth quarter. The average price for the whole year is about US$4,775 per ounce. But the prerequisite for this recovery path is that the Federal Reserve can achieve a more substantial dovish turn - a necessary condition to reignite gold's upward momentum.

Silver: From "Shortage Premium" to "Rebalancing of Supply and Demand"

Silver is undergoing a profound switch in fundamentals. Last year, extreme nervousness in physical markets drove silver to significantly outperform gold; this year, that logic is reversing.

JPMorgan Chase expects that demand for silver from solar panels will drop by about 30% year-on-year in 2026, equivalent to a decrease of about 60 million ounces. This means that after five consecutive years of recording supply deficits, the silver market (excluding inventories and ETF flows) will balance out this year and may even turn into a small surplus in 2027.

The change in the supply and demand pattern directly affects the fluctuation characteristics of silver relative to gold: on days when gold falls, silver's decline will be more significant - this is exactly the opposite of last year's asymmetric pattern of "gold rose and silver rose even more".

Based on this, JPMorgan Chase expects the gold-to-silver ratio to move closer to 70 (in the second half of 2026) and 75 (in 2027) from the current level. The price of silver is expected to fluctuate in the range of 62 to 65 US dollars per ounce, with the average price for the whole year in 2026 being about 70.6 US dollars, and about 63.9 US dollars in 2027.

Platinum and palladium: follow gold to find the bottom and wait for stabilization signals

Platinum and palladium have also been hit by large-scale ETF sell-offs. The metals have continued to be supplied to the physical market, and prices have fallen simultaneously with gold.

In terms of platinum, the current price of about US$1,600 per ounce is close to the "fundamental incentive price" identified by JPMorgan Chase - below this level, the necessary supply investments of South African mining companies will face the risk of being shelved, thus triggering a more serious and long-lasting supply shortage.

JPMorgan Chase predicts that as gold stabilizes in the second half of 2026, platinum will simultaneously find more solid support, with the average price expected to rise back to US$1,800 by the end of the year, and further rise to US$1,950 by the end of 2027.

In terms of palladium, the continued increase in electric vehicle penetration is pushing the supply-demand balance into significant excess. JPMorgan Chase believes that the platinum-palladium price gap needs to be further expanded to accelerate the substitution trend and support palladium demand. Palladium is expected to rebound to US$1,350 by the end of the year, but the average price throughout 2027 will still be limited and remain at about US$1,300.