On Thursday, HSBC Holdings PLC revised down its average gold price forecasts for 2026 and 2027, citing a shift towards more hawkish expectations for Federal Reserve monetary policy and the persistent pressure from a stronger US dollar. The bank lowered its 2026 average price forecast from the previous $4,864 per ounce to $4,560, and its 2027 forecast from $5,000 to $4,925. HSBC Holdings PLC anticipates that for the remainder of 2026, gold will fluctuate within a range of $3,800 to $4,700, ending the year around $4,750.
Since reaching its historic peak of $5,594.82 per ounce on January 29th, spot gold has fallen by more than 20% and is currently trading around $4,100. The bank noted that a change in market perception regarding the Fed's monetary policy and its impact on the US dollar is a central reason for the ongoing selling pressure and price decline in gold.
Key Drivers of the Recent Decline
Recent military actions by the US and Israel against Iran have, counterintuitively, intensified the gold price decline. When the conflict initially pushed oil prices higher, the market's reaction was not a flight to safety but rather an expectation of higher inflation and more aggressive Fed policy. The rise in oil prices has reignited inflation concerns, with the probability of a Fed rate hike in September now rising to 68%. A stronger US dollar and rising real yields have further increased the opportunity cost of holding non-yielding gold.
Potential Support for Gold
Despite the current headwinds, HSBC Holdings PLC believes downside risks for gold may be limited, as the market has largely priced in the effects of a strong dollar and high interest rates. The bank pointed out that several structural factors that supported gold before the Middle East conflict—including fiscal deficit concerns, economic uncertainty, and sovereign debt burdens—remain in place. The World Gold Council has also indicated that if the current macro conditions persist, gold could trade around $4,100 by year-end. HSBC Holdings PLC expects that the substantial outflows from gold ETFs seen in the first half of the year could partially reverse in the latter half, providing some support to the market.
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