JPMorgan Chase: Gold prices will break the $4,000 mark in early 2026, with one scenario predicting gold prices exceeding $5,000 within two quarters

Gold is likely to usher in a new bull market driven by investor demand.

According to news from the Chasing Wind Trading Desk, JP Morgan's latest research report has raised its price forecast for gold. With the upcoming Federal Reserve interest rate cut cycle and the strong investor demand it ignites, it is expected that the spot gold price will break through the $4,000 per ounce mark in the first quarter of 2026. At the same time, if the independence of the Federal Reserve is compromised, investor capital rotation could push gold prices to a high of $5,000 within two quarters.

The core driving force behind this round of gains is undergoing a transformation. The report emphasizes that investor demand has replaced central banks as the "main catalyst" for rising gold prices. Influenced by expectations of a shift in Federal Reserve policy, U.S. Treasury yields have fallen sharply, reigniting inflows into gold ETFs. Data shows that in the two weeks ending September 5, 2025, global gold ETF holdings increased by nearly 72 tons, the largest inflow since mid-April.

Gold prices have already reacted to this. Gold has risen about 6% so far in September, breaking through the previous high of $3,500, and is currently trading near a historical high of $3,680 per ounce.

Interest Rate Cut Cycle Begins, Investors Back in the Driver's Seat

According to the report, the dominant force in the gold market is undergoing a fundamental shift. The bull market foundation, previously supported by structural gold purchases by central banks, remains solid, but now, "investors are back in the driver's seat."

Historical data shows that the Federal Reserve's interest rate cut cycles are the "sweet spot" for gold. JP Morgan's report points out that since the early 21st century, gold has performed strongly around the time the Federal Reserve begins its interest rate cut cycle, with cumulative returns typically reaching double digits within nine months after the cuts begin.

As market expectations for a 25 basis point rate cut by the Federal Reserve next week continue to solidify, global gold ETFs saw significant inflows of nearly 72 tons in the two weeks ending September 5, valued at approximately $8 billion. Meanwhile, non-commercial net long positions in COMEX gold futures have also reached new highs. JP Morgan economists expect the Federal Reserve to continue cutting rates in the following three meetings after next week's cut.

The report believes that signs of weakness in the labor market outweigh inflation concerns, which will keep the Federal Reserve in a dovish stance, with interest rate risks skewed towards lower levels. The decline in nominal yields directly translates into lower real yields, which is a key positive factor for gold investment demand, especially for those relying on Western ETF funds

Target Price $4,000: Coming Faster Than Expected

Based on a strong return of investor demand, JPMorgan Chase has raised its gold price forecast. The report predicts that the gold price will reach an average of $3,800 per ounce in the fourth quarter of 2025 and will break through $4,000 per ounce in the spot market in the first quarter of 2026. This forecast is a quarter earlier than the bank's previous judgment.

This confidence is supported by strong historical data. The report analyzed the last six Federal Reserve rate-cutting cycles and found that gold prices exhibited a sustained increase both before and after the start of rate cuts. In the last four rate-cutting cycles, gold achieved double-digit cumulative returns within nine months after the cuts began.

Although the market may experience volatility in the short term due to "buy the expectation, sell the fact," from a longer-term perspective, the current rally driven by investors has a solid foundation, compounded by concerns over stagflation, fiscal sustainability, and demand for currency devaluation hedges.

Tail Risk: How Could Gold Prices Reach $5,000 in Two Quarters?

The most striking part of the report is the quantitative analysis of a high-impact, low-probability "tail risk." The core of this risk is the erosion of the Federal Reserve's independence.

JPMorgan Chase's analysis suggests that while this is not currently a major market driver, if concerns about the Federal Reserve's independence escalate sharply, it could undermine investor confidence in the dollar and U.S. Treasury bonds, triggering a "flight to safety" rotation of funds into hard assets like gold. Analysts point out that recent controversies surrounding the dismissal of Federal Reserve Governor Cook have heightened market concerns about government attempts to influence monetary policy.

The bank's model calculations reveal the astonishing impact of this rotation:

• Market Size Asymmetry: The total value of gold held by global private investors and official entities is approximately $9.4 trillion, while the U.S. Treasury bond market alone is as large as $29 trillion.
• Extremely High Price Elasticity: The report's regression analysis shows that since 2017, an additional net demand of $10 billion in gold per quarter from investors and central banks can drive gold prices up by about 3% quarter-on-quarter.
• Scenario Simulation: If a very small portion of funds rotates out of the $29 trillion U.S. Treasury bond market each quarter, it could trigger significant fluctuations in gold prices.

For example, if the funds flowing from U.S. Treasuries to gold exceed the recent average by $28 billion, reaching about $80 billion per quarter, this would be approximately 0.1% of the total market value of U.S. Treasuries. Even such a "relatively insignificant" fund rotation could lead to a substantial increase in gold prices, with just two consecutive quarters of this trend being sufficient to push gold prices above $5,000 per ounce from current levels.

Gold is Not Without Worries

Despite the positive outlook, JPMorgan Chase has also pointed out major risks. The biggest risk lies in a sharp decline in central bank gold purchasing demand that exceeds expectations.

According to the report, the central bank's gold purchases in the second quarter of 2025 are projected to be 166.5 tons, the lowest level since the second quarter of 2022. Although JPMorgan Chase predicts that the annual average gold purchases by central banks will remain at a historical high of 700-800 tons in 2025 and 2026 (far above the average level of about 400 tons before 2022), a significant drop in central bank demand due to excessively high prices could pose a challenge to the sustainability of the upward trend.

In contrast, the outlook for silver is more complex. The report states that silver is approaching a long-term resistance zone around $42, which may limit its upside in the medium term. Additionally, silver's significant industrial demand characteristics make it more susceptible to shocks during times of heightened macroeconomic risk. Therefore, while JPMorgan Chase is also optimistic about silver prices, its confidence in the gold bull market is stronger.

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