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

According to TechFlow on October 28, Yuxuan Tang, Head of Interest Rates and FX Strategy at JPMorgan Private Bank Asia, stated that due to persistently thin liquidity and remaining room for interest rate increases, gold continues to face downside risk following the recent sell-off. Once interest rates peak, gold will find solid support. The Federal Reserve is expected to raise rates in December and Q1 2027, which will drive the 10-year US Treasury yield to peak between 5.25% and 5.5% around mid-year, above its current level of slightly over 5%. Stronger yields have dampened investor interest in the non-yielding asset, gold.

However, once the Fed concludes its tightening cycle, given gold's enduring appeal as a hedge against economic and policy risks, prices could rebound strongly later next year. The gold market remains "quite fragile," with virtually no technical support below $4,000 per ounce. During volatile episodes such as the US and Israeli elections, gold has served as a stable funding source for other assets, but with market expectations now shifted toward higher and later yield peaks, determining a floor is currently difficult.