JPMorgan: Gold still faces downside risk as liquidity remains thin and rates have room to rise

TechFlow news, Oct. 28, Yuxuan Tang, head of rates and FX strategy at JPMorgan Private Bank Asia, said that because liquidity remains thin and rates still have room to rise, gold continues to face downside risk after the recent sell-off. When rates peak, gold will find a solid floor. The Fed is expected to raise rates in December and in Q1 2027, which will push the 10-year U.S. Treasury yield to a mid-year peak of 5.25% to 5.5%, above the current level of slightly over 5%. Stronger yields have weakened investor interest in gold, a non-yielding asset.

But once the Fed ends its tightening cycle, 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 vulnerable', with almost no technical support below $4,000/oz. During disruptive events such as U.S. and Israeli elections, gold has been a stable source of funding for other assets, and because market expectations have shifted to a higher and later yield peak, it is difficult to judge a bottom now.

Source: TechFlow