Gold is now once again at the mercy of the Fed.

The logic of the gold market is undergoing a notable "return." A new study from JPMorgan Chase reveals a harsh market reality: the pricing power of gold has been reclaimed by the Federal Reserve.

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

JPMorgan Chase has lowered its average gold price forecast for the third quarter to $4,300 per ounce, and to $4,500 per ounce for the fourth quarter, a substantial reduction of 20% to 25% compared to previous expectations. This indicates that the earlier "blindly bullish" phase driven by safe-haven demand and central bank buying has ended.

Although gold prices have seen a technical rebound from the $4,000 per ounce level, the bank clearly states that near-term risks remain tilted to the downside—if summer economic data surprises to the upside, forcing the Fed to raise interest rates prematurely, gold prices could fall below $4,000, triggering technical selling and testing the $3,500 to $3,600 range.

At the same time, JPMorgan Chase maintains a long-term bullish stance on gold, expecting that by 2027, as central bank gold purchases and physical demand structurally return, gold prices will resume their upward trajectory, with the average annual price expected to reach $4,775 per ounce.

In other precious metals, silver is undergoing a fundamental shift from "supply tightness" to "moving toward balance," and the gold-to-silver ratio is expected to further converge toward 70 to 75, with silver prices anticipated to trade in the $62 to $65 per ounce range; platinum, having touched a key incentive price for South African supply near $1,600 per ounce, is expected to rebound alongside stabilizing gold to $1,800 by year-end and $1,950 by the end of 2027; palladium continues to face pressure from declining demand due to electric vehicles, and after recovering to $1,350 by year-end, its average annual price for 2027 is expected to remain around $1,300.

ETF Flows Reclaim Pricing Power: Gold and Real Interest Rates Re-couple

To understand the current gold market, it is essential to first clarify a historical context.

Before 2022, gold prices had a strong negative correlation with U.S. real interest rates—when real rates rose, the opportunity cost of holding non-yielding gold increased, prompting ETF holders and futures investors to reduce positions. This logic, simple and stable, dominated the market for over a decade.

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

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

• India: To protect its external accounts, the government raised import tariffs and tightened import restrictions, leading to a sharp contraction in physical demand.
• China: Domestic gold premiums remained weak, reflecting sluggish retail demand.
• Central Banks: Although net buying resumed in April and May, the pace was notably cautious.
• Retail Investors: After Warsh reaffirmed his commitment to fighting inflation, the "debasement trade" narrative cooled, with funds shifting toward new themes like AI chips.

The overall quieting of demand has made interest rate-sensitive ETF flows the only active marginal force. Since late February, global gold ETFs have seen net outflows of approximately 128 tons (a decrease of about 3%), consistent with the historical relationship corresponding to a roughly 50 basis point rise in U.S. 10-year real rates.

But the actual price decline far exceeds what ETF outflows alone can explain—gold prices' sensitivity to real rates is even more pronounced than under the pre-2022 regime: For every 1 basis point rise in real rates, gold prices fall by about $20, accumulating a decline of over 20%.

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

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

JPMorgan Chase's baseline forecast is that the Fed will hold steady this year, with the first rate hike delayed until the third quarter of 2027. However, market pricing has already run ahead—the OIS forward market is currently almost fully pricing in one rate hike this year and expects a cumulative increase of nearly 40 basis points by April 2027, which is earlier and more aggressive than JPMorgan's baseline.

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

In this context, unless employment or inflation data clearly weaken, the market will continue to pull forward the timing of Fed rate hikes rather than significantly unwinding hawkish expectations. This "persistently upward-sloping OIS curve" will act like a cap, suppressing the recovery of ETF holdings and dampening broader investor demand for gold.

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

Near-Term Downside Risks Significant, Long-Term Logic Unchanged

For the near-term outlook, JPMorgan Chase clearly states that the risks in the current baseline forecast are skewed to the downside, mainly from two paths:

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

JPMorgan's interest rate strategists believe the rate hike cycle of 1999-2000 is the closest historical analog, where the Fed cumulatively raised rates by about 50 to 100 basis points. If the market begins pricing in such a scenario, intermediate-term Treasury yields could rise by another 50 basis points, gold prices would likely fall below $4,000 per ounce, triggering technical selling with a target range of $3,500 to $3,600.

• Path Two: An unexpected strengthening of the U.S. dollar.

JPMorgan's FX strategists believe the specter of "U.S. exceptionalism" is reappearing. A more critical risk is that if AI is more broadly used as a geopolitical lever, the growth divergence between the U.S. and other economies could widen further, pushing the dollar into a stronger trend, adding additional pressure on dollar-denominated gold.

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

Two structural forces supporting the long-term bullish view remain intact:

• Central Bank Gold Purchases: Net buying resumed in April and May, and China's gold import data remains strong (even though domestic retail demand is weak, it suggests official-level accumulation continues). JPMorgan Chase has slightly lowered its 2026 global central bank net gold purchase forecast from 640 tons to 600 tons, but the strategic logic for long-term accumulation remains unchanged.
• Return of Physical Demand: Once India's import restrictions are lifted, it could trigger a concentrated release of pent-up demand; a cyclical recovery in Asian physical demand will also provide support for gold prices.

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

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

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

JPMorgan Chase expects that silver demand from solar panels will decline by approximately 30% year-over-year in 2026, equating to a reduction of about 60 million ounces. This means that after five consecutive years of supply deficits, the silver market (excluding inventories and ETF flows) will move toward balance this year, and could even turn into a small surplus by 2027.

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

Based on this, JPMorgan Chase expects the gold-to-silver ratio to further converge toward 70 (second half of 2026) and 75 (2027) from current levels, with silver prices expected to trade in a range of $62 to $65 per ounce, with an annual average of approximately $70.6 in 2026 and $63.9 in 2027.

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

Platinum and palladium have also suffered from large-scale ETF liquidations, with metal continuously supplied to the physical market, and prices falling in tandem with gold.

For platinum, the current price around $1,600 per ounce is close to what JPMorgan Chase considers the "fundamental incentive price"—below this level, necessary supply investments by South African mining companies would face risk of being shelved, potentially leading to more severe and persistent supply tightness.

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

For palladium, the ongoing increase in electric vehicle penetration is pushing the supply-demand balance toward a significant surplus. JPMorgan Chase 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 its average annual price in 2027 will remain constrained at around $1,300.

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