Gold prices experienced a significant decline last Friday. While markets remained volatile on Monday, JPMorgan views this as merely a minor setback on the path toward higher year-end prices.
The bank has raised its projected price target for gold to $6,300 per ounce by the end of 2026, representing an increase of approximately 34% from last Friday's level of around $4,700. Although this forecast may appear overly optimistic following recent events, JPMorgan analyst Gregory Shearer remains confident that a rebound is imminent.
Prices for gold and silver fell sharply last Friday after news emerged that former Federal Reserve Governor Kevin Warsh is former President Trump's nominee for the next Fed Chair. This development prompted a reassessment of the so-called "debasement trade," which has been a major factor driving gold to record highs over the past 12 months.
However, according to Shearer, investors need not worry about further market corrections. He emphasized in his report that demand for the metal is robust and has exceeded his team's expectations.
Shearer wrote, "Despite recent market volatility, we maintain our conviction that the long-term upward trend will remain intact." He added that persistent diversification trends will propel gold to outperform other assets.
Shearer specifically referred to central bank demand, which he expects will continue its upward trajectory through 2026. He also predicted that investor enthusiasm will not wane, even if startling market fluctuations follow last Friday's sharp sell-off.
JPMorgan analysts wrote, "Although certain factors during this correction may exert some influence, we anticipate that diversification by both central banks and investors will generate sufficient demand this year—given gold's dynamic and multifaceted role as a portfolio hedge—ultimately driving the price to $6,300 per ounce by the end of 2026."
JPMorgan is less optimistic about silver's prospects. Shearer noted that his team finds it increasingly difficult to accurately assess the drivers of silver prices. They indicated that gold may benefit as silver prices pull back over the coming months.
All of this points to "a demand environment that results in inelastic supply, thereby pushing prices higher in an attempt to eventually rebalance the market."
Overall, JPMorgan analysts believe that regardless of the monetary policy the Fed pursues under Warsh, gold demand is strong enough to reach historic levels by 2026. They argue that even amid significant macro shifts, gold will remain the most effective safe-haven asset and portfolio hedge.
The analysts wrote, "We remain firmly convinced that our bullish view on gold is the most robust from this point forward. In the near term, we are more cautious about re-entering the silver market, as we first need confirmation that some of the recent froth has been fully squeezed from prices."
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