Major Banks Maintain Bullish Stance on Gold Despite Headwinds

Gold faces pressure from delayed rate cuts and a hawkish Fed, but structural demand from central banks and firm Wall Street targets provide a bullish foundation.

Gold faces significant fundamental challenges following a sharp March decline. The monetary landscape has turned hostile, with money markets having all but priced out interest rate cuts for 2026. The impending leadership change at the Federal Reserve, set to bring the hawkish Kevin Warsh to the helm in May, promises additional policy rigidity. Yet, institutional investors and central banks are stubbornly refusing to relinquish their optimistic outlook for the precious metal.

Structural Demand Provides a Foundation

A robust structural demand narrative underpins the market, countering short-term pressures. Emerging markets are actively diversifying their currency reserves away from the US dollar. Beyond China, which has expanded its purchases for 15 consecutive months, previously inactive nations like Malaysia and South Korea have re-emerged as buyers. Analysts at Goldman Sachs project that central banks in emerging markets will purchase approximately 60 tonnes of gold per month in 2026.

Market analysts remain similarly unshaken by the recent weakness. Not a single major financial institution has downgraded its forecasts. Year-end price targets from Wall Street’s leading firms sit substantially above current trading levels. Goldman Sachs maintains its $5,400 per ounce target, while J.P. Morgan advocates for a $6,300 per ounce objective.

The Distant Horizon for Rate Cuts

The immediate catalyst for gold’s pressure is a market environment that has abandoned expectations for monetary policy easing this year. Today’s release of the FOMC meeting minutes and the latest US inflation data reinforce this shift. Traders no longer anticipate any rate reductions in the current calendar year.

This outlook is bolstered by warnings from the New York Fed of persistent inflation running as high as 2.75%, driven significantly by energy price shocks stemming from the Middle East. Consequently, the gold price slid to a yesterday’s closing level of $4,733.30. This marks a monthly decline exceeding eight percent for the commodity. Rising oil prices, a strengthening US dollar, and fading hopes for a diplomatic resolution to the Iran conflict are applying further downward pressure on quotations.

The Path Forward and Key Support Levels

The immediate price trajectory now hinges critically on incoming macroeconomic data concerning economic growth and the labor market. Should the metal decline further, market observers have identified a substantial support zone between $4,400 and $4,600 per ounce.

However, the base-case scenario among analysts anticipates a swift recovery into the $4,750 to $5,500 range. A return to this bracket would bring the all-time high of $5,450, reached at the end of January, back within striking distance.