MetalsFocus: Medium to long-term supporting factors may drive gold prices to continuously refresh historical highs before 2026

According to the Zhitong Finance APP, MetalsFocus stated that on September 17, the Federal Reserve announced a 25 basis point interest rate cut as the market expected. Boosted by this news, gold prices briefly rose to a historic high of $3,708 per ounce and have remained strong recently. Looking ahead, MetalsFocus believes that in the medium to long term, macroeconomic and geopolitical factors will continue to support gold investment and prices, thus the trend of market investors buying on dips is expected to continue, driving gold prices to consistently refresh historical highs before 2026.

MetalsFocus pointed out that the Federal Reserve's "dot plot" indicates there will still be two more 25 basis point rate cuts by the end of 2025, which is generally in line with market expectations. However, the forward guidance for the period of 2026 to 2027 is noticeably more cautious. The median forecast shows that by the end of 2026, the interest rate level will drop to around 3.4%, which means there will only be one more rate cut in 2026. In contrast, the implied pricing of federal funds futures is more accommodative, pointing to at least two (or even three) rate cuts next year, with rates potentially nearing 3% by the end of 2026.

More critically, although the Federal Reserve has temporarily avoided direct questioning of its independence following the recent ruling on Governor Lisa Cook (who was previously targeted for dismissal by President Trump), the pressure from Trump to accelerate rate cuts may still persist. Given the evident divisions among Federal Reserve officials and the potential change in chairmanship next year, the pace of rate cuts in 2026 could be faster than current predictions.

Concerns about inflation in the market will also continue to benefit gold. Although the latest U.S. inflation data indicates that the transmission effect of tariffs is temporarily limited, its impact may take longer to manifest. The risk inherent in this is that as nominal rates decline, inflationary pressures may become more persistent, leading to a more significant drop in real rates, thereby providing additional support for gold prices.

Gold is also expected to benefit from the ongoing upward trend in global stock markets. Despite increasingly evident signs of a slowdown in the U.S. labor market, corporate earnings remain robust, and the overall risk of economic recession is limited, which has also boosted the U.S. stock market and other major investment markets in recent months. Looking ahead, as the Federal Reserve faces increasing pressure to stimulate growth and lower financing costs, market confidence in the U.S. stock market is expected to remain stable. If U.S. stocks rise further, it will continue to drive investors to diversify their portfolios, which typically also benefits gold.

Additionally, although geopolitical tensions have eased somewhat since the beginning of the year, the risk of instability re-emerging cannot be ruled out, and uncertainties regarding the U.S. government's economic and foreign policies may persist. Overall, these factors will continue to support the rationale for institutional investors to increase their holdings of gold in medium to long-term asset allocation.

Federal Funds Rate Forecast

*Implied interest rate of federal funds futures;