Gold Drops Below $4,500. Goldman Bullish While JPMorgan Cuts Gold Price Target; Will the Gold Bull Market Return in 2026?

TradingKey - In early Asian trading this Monday, spot gold prices dropped below $4,500 for the first time since late March, hitting a low of $4,480.01.

On the news front, Trump posted on the social media platform Truth Social on Sunday that Iran's "time is running out" and warned that if action is not taken soon, they "will have nothing." According to a report by the U.S. news website Axios citing two U.S. officials, Trump is expected to meet with his national security team this Tuesday (19th) to discuss options for military action against Iran again.

Currently, Wall Street investment banks are divided on the outlook for gold. JPMorgan Chase (JPM) maintained its year-end gold price forecast of $6,000 in its latest precious metals research report released on May 17, but lowered its full-year average gold price forecast from $5,708 to $5,243. Goldman Sachs (GS) remains bullish on gold, reiterating its year-end price target of $5,400. Can the gold bull market return in 2026?

Why gold prices continue to trade sideways in 2026?

Gregory C. Shearer, chief analyst of JPMorgan's commodities research team, stated that the reason for the near-absence of reports on gold over the past few weeks was that there was "simply nothing to say." The report noted that gold has been trading sideways for some time, trapped between its 50-day moving average of approximately $4,730 and its 200-day moving average of approximately $4,340. Coupled with market sentiment hitting a low point, open interest and trading volume for COMEX gold futures have remained sluggish.

Shearer pointed out that the primary reason is that investor interest lies elsewhere. Recently, U.S. stocks have entered a sustained upward cycle, while gold prices have been pressured by the situation in the Strait of Hormuz, energy prices, inflation trends, and the Federal Reserve's monetary policy path, leaving the market with almost no confidence in gold's short-term direction.

Long-term gold bull market logic remains unchanged.

In the long run, however, JPMorgan believes the structural bull case for gold remains intact, as currency devaluation, U.S. fiscal deficit risks, the polarization of the geopolitical landscape, and concerns over the unpredictability of U.S. policy are all supporting a floor for gold prices.

Goldman Sachs analysts Lina Thomas and Daan Struyven noted in a May 15 report that robust central bank demand will support gold prices. The report indicates that gold purchases are projected to rebound to a monthly average of 60 tons by 2026. Goldman Sachs' year-end gold price forecast is $5,400, while UBS is also bullish, setting a target of $5,600 for the end of 2026.

Key Variables for Gold Price Trends: Strait of Hormuz Transit and Fed Rate Hike Path

JPMorgan noted that the two most critical variables currently influencing gold prices are the accessibility of the Strait of Hormuz and the Federal Reserve's policy trajectory. According to forecasts from JPMorgan's oil market analysts, the baseline scenario involves the reopening of the Strait of Hormuz in June. Analysts contend that once the strait reopens, tail risks for energy prices and inflation will recede, the US dollar and Treasury yields will begin to decline, and expectations for Fed rate hikes will moderate. Consequently, gold is expected to rally and potentially test key technical resistance levels in the $4,900-$5,100 range.

However, should U.S. employment remain robust and inflation continue its upward trend, prompting the Fed to commence a rate hike cycle, this would pose the primary risk to gold prices. JPMorgan believes that in such a case, Western gold ETFs may see sustained net outflows and central bank gold demand could soften, exerting persistent downward pressure on gold. While the probability of a rate hike in 2026 remains low, it is certainly not impossible.

Spot Silver Supply and Demand Return to Balance, Invalidating Bull Market Support Logic

Unlike gold, which still possesses rebound momentum, silver has not been as fortunate. J.P. Morgan noted that the investment rationale supporting silver at the beginning of this year has largely dissipated. Currently, COMEX silver inventories have returned to 2024 levels, ETF holdings have retreated from their highs, and the London spot market has ample liquidity, meaning physical silver tightness is no longer evident. Analysts expect silver to end its five-year streak of deficits and shift toward a supply-demand equilibrium this year, with a slight surplus even possible next year; the gold-silver ratio is also projected to recover gradually, returning to an average of around 75:1 by the end of next year. However, given the expectations of a gold rally, J.P. Morgan still forecasts that silver prices will reach an average of $90 in the fourth quarter.