HSBC Forecasts Gold Rebound in 2027 if Fed Rate Hikes Slow

HSBC anticipates that gold prices could rebound in 2027 if the Federal Reserve's rate hikes are less aggressive than market expectations. The bank has adjusted its short-term outlook downward due to recent pressures from higher oil prices, a strong US dollar, and hawkish rate expectations. Despite these near-term challenges, HSBC remains optimistic about gold's long-term prospects, citing potential shifts in the Fed's policy stance.

James Steel, HSBC's chief precious metals analyst, noted that gold has experienced significant volatility this year. Prices peaked at $5,450 an ounce in late January but plummeted to $3,942 by the end of June amid geopolitical tensions, rising oil costs, higher yields, and a stronger dollar. A brief recovery in late summer was short-lived after the Fed's September rate hike reignited expectations of further tightening.

Central bank buying and institutional demand are expected to provide ongoing support for gold. Official sector purchases have remained steady, driven by diversification strategies and geopolitical concerns. Institutional demand for large bars has also held up, particularly in India and China, where regulatory changes now allow financial institutions to purchase more gold. Additionally, ETF selling has begun to reverse as investors return to gold's traditional role as a safe haven.

However, physical demand remains weak due to high prices and tighter household incomes, which have reduced jewelry and coin purchases. While mine output is projected to rise in 2026 and 2027, supply increases are expected to be modest. Recycling is anticipated to pick up later this year and into 2027, potentially balancing some of the demand challenges.