Gold is now once again at the mercy of the Federal Reserve.

The logic of the gold market is undergoing a notable "regression." A recent study by JPMorgan reveals a harsh market reality: pricing power in gold has returned to the hands of the Federal Reserve.

On July 4, according to reports from the Chase Trading Desk, JPMorgan stated in its latest precious metals research report that as purchasing momentum from other demand sectors has cooled across the board, the interest-rate-sensitive gold ETF flows have regained marginal pricing power over gold prices—the negative correlation between gold prices and U.S. real interest rates has made a strong comeback after years of dormancy. This means gold's ups and downs once again depend on a core variable: the Federal Reserve's next move.

JPMorgan lowered its average gold price forecast for Q3 to $4,300 per ounce, and for Q4 to $4,500 per ounce, a significant reduction of 20% to 25% from previous expectations. This suggests that the earlier "blindly bullish" phase, driven by safe-haven demand and central bank buying sprees, has come to an end.

Although gold prices have rebounded technically from around $4,000 per ounce, the bank clearly states that near-term risks remain tilted to the downside—if summer economic data overshoots to the upside, forcing the Fed to raise interest rates earlier, gold could break below $4,000, triggering technical selling and dropping into the $3,500 to $3,600 range.

At the same time, JPMorgan maintains its long-term bullish stance on gold, expecting that with the structural return of central bank gold purchases and physical demand in 2027, gold prices will resume their upward trend, with average annual prices potentially rising to $4,775 per ounce.

In other precious metals, silver is transitioning from "supply tightness" to "moving toward balance" in its fundamentals. The gold-silver ratio is expected to further converge toward 70 to 75, with silver prices likely to fluctuate in the $62 to $65 per ounce range. Platinum, near $1,600 per ounce, has touched the key incentive price for South African supply, and as gold stabilizes, it is expected to rise to $1,800 by year-end and $1,950 by the end of 2027. Palladium, under pressure from electric vehicles eroding demand, is expected to recover to $1,350 by year-end, but average prices in 2027 will likely remain around $1,300.

ETF Flows Regain Pricing Power: Gold Re-binds with Real Interest Rates

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

Before 2022, gold prices were highly negatively correlated with U.S. real interest rates—when real interest rates rose, the opportunity cost of holding non-yielding gold increased, prompting ETF holders and futures investors to reduce positions. This logic was simple and stable, dominating the market for over a decade.

After 2022, this relationship broke down. During the Fed's aggressive rate hike cycle, ETF holdings saw large outflows, but the explosive growth in central bank gold purchases not only filled the gap but also freed gold from the "shackles" of real interest rates. Subsequently, with the rise of the "currency debasement trade" in 2025, retail physical demand, rapid expansion of Asian ETF holdings, and momentum-driven capital inflows jointly pushed gold prices to historical highs.

However, since March 2026, this pattern has reversed again. Initial deleveraging triggered by the U.S.-Iran conflict, combined with strong hawkish signals from newly appointed Fed Chair Warsh, caused other demand sectors to collectively "cool down":

• India: To protect its external account, the government raised import tariffs and tightened import restrictions, leading to a sharp decline in physical demand;

• China: The domestic gold premium remained low, reflecting weak retail demand;

• Central banks: Although net purchases resumed in April and May, the pace was noticeably more cautious;

• Retail investors: After Warsh reiterated his commitment to fighting inflation, the "debasement trade" narrative cooled, with capital instead chasing new themes such as AI chips.

The full stagnation in demand has made interest-rate-sensitive ETF flows the only active marginal force. Since the end of February, global gold ETFs have seen net outflows of about 128 tons (a decline of about 3%), broadly consistent with the historical relationship of a roughly 50-basis-point rise in 10-year U.S. real yields.

But the actual price decline far exceeds what ETF outflows alone can explain—gold prices are now more sensitive to real interest rates than even the pre-2022 regime: for every 1 basis point increase in real yields, gold falls by about $20, accumulating a decline of over 20%.

JPMorgan believes that this "excess sensitivity" reflects the extreme weakness of other demand sectors—their absence amplifies the impact of real interest rate shocks while compressing gold's support base.

The Fed's Path: Patience is Golden, but Upside Space is Pressured

JPMorgan's base case is that the Fed will stay on hold this year, with the first rate hike delayed until Q3 2027. However, the market has already priced in more—OIS forward markets are almost fully pricing in one rate hike this year and expect cumulative hikes of nearly 40 basis points by April 2027, which is earlier and more aggressive than JPMorgan's base case.

Even if the Fed ultimately shows patience as JPMorgan expects, the problem remains: the upward slope of the OIS curve (where the market prices the next move as a hike) will be quite sticky. This is because the U.S. labor market has recently shown strong momentum, new Chair Warsh has a tougher stance on inflation, and the 10-year Treasury yield is still over 20 basis points below the model-implied fair value, suggesting further room for mid-term rates to rise.

Against this backdrop, unless employment or inflation data weaken significantly, the market will continue to bring forward the timing of the Fed's rate hike rather than substantially unwinding hawkish expectations. This "persistently upward-sloping OIS curve" will act like a cap, suppressing ETF holdings and curbing broader investor demand for gold.

Based on the latest real interest rate forecasts, JPMorgan has sharply revised down its 2026 global gold ETF flow forecast from a net inflow of about 400 tons to a net outflow of about 50 tons (as of June 26, a net inflow of about 19 tons is still recorded year-to-date).

Short-Term Downside Risks Are Significant, Long-Term Logic Unchanged

For near-term trends, JPMorgan clearly states that the balance of risks for the current base case is tilted to the downside, mainly from two paths:

• Path One: The Fed is forced to raise rates earlier.

JPMorgan's interest rate strategists believe that the rate hike cycle of 1999-2000 is the closest historical analogy, with the Fed hiking a cumulative 50 to 100 basis points. If the market begins to price in this scenario, mid-term Treasury yields could rise another 50 basis points, and gold prices would likely break below $4,000 per ounce, triggering technical selling, with a target range of $3,500 to $3,600.

• Path Two: Unexpected dollar strength.

JPMorgan's FX strategists believe that the shadow of "American exceptionalism" is reappearing. A more critical risk is that if AI is more widely used as a geopolitical lever, the growth divergence between the U.S. and other economies could widen further, driving the dollar to a stronger trajectory, putting additional pressure on gold priced in dollars.

Despite a more cautious near-term outlook, JPMorgan has not abandoned its long-term bullish stance on gold. The report emphasizes that the "debasement trade" is not dead, only temporarily overshadowed by the hawkish monetary policy narrative.

Two structural forces supporting long-term bullishness remain:

• Central bank gold purchases: Net buying resumed in April and May, and China's gold import data remains strong (even with weak domestic retail demand, suggesting ongoing accumulation at the official level). JPMorgan slightly lowered its 2026 net central bank gold purchase forecast from 640 tons to 600 tons, but the long-term strategic logic of accumulation remains unchanged.

• 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 support gold prices.

JPMorgan expects that as these structural forces reassert themselves in 2027, gold prices will rise quarter by quarter: Q1 at $4,600, Q2 at $4,700, Q3 at $4,800, Q4 at $5,000, with an annual average of about $4,775 per ounce. However, the prerequisite for this recovery path is that the Fed achieves a more substantial dovish pivot—this is a necessary condition to reignite gold's upward momentum.

Silver: From "Scarcity Premium" to "Supply-Demand Rebalancing"

Silver is undergoing a profound fundamental shift. Last year, extreme tightness in the physical market drove silver to significantly outperform gold; this year, that logic is reversing.

JPMorgan expects that solar panel demand for silver in 2026 will decline by about 30% year-over-year, equating to a reduction of about 60 million ounces. This means that after five consecutive years of supply deficits, the silver market (excluding inventory and ETF flows) will move toward balance this year, potentially turning into a slight surplus by 2027.

The shift in supply-demand dynamics directly affects silver's volatility relative to gold: on days when gold falls, silver will decline more sharply—this is the opposite of last year's asymmetric pattern where "when gold rises, silver rises more."

Based on this, JPMorgan expects the gold-silver ratio to further move toward 70 (second half of 2026) and 75 (2027) from current levels, with silver prices likely fluctuating in the $62 to $65 per ounce range. The 2026 annual average price is expected to be about $70.6, and 2027 about $63.9.

Platinum and Palladium: Following Gold to Find a Bottom, Waiting for Stabilization Signals

Platinum and palladium have also suffered from massive ETF sell-offs, with metals continuously supplied to the physical market, and prices falling alongside gold.

For platinum, the current price of around $1,600 per ounce is close to what JPMorgan considers the "fundamental incentive price"—below this level, necessary supply investments by South African miners are at risk of being shelved, leading to more severe and prolonged supply tightness.

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

For palladium, the continued increase in electric vehicle penetration is pushing the supply-demand balance toward a significant surplus. JPMorgan believes the platinum-palladium spread needs to widen further to accelerate substitution trends and support palladium demand. Palladium is expected to recover to $1,350 by year-end, but the 2027 annual average price will remain constrained, staying around $1,300.