Fed turned a ‘pause in the structural bullish gold story' into ‘a deeper freeze' – J.P. Morgan's Shearer

J.P. Morgan’s Gregory Shearer said the Fed’s hawkish pivot has likely prolonged the pause in gold’s structural price rally. Near term, he expects base metals to present the more attractive opportunities versus gold. The interview also addressed how oil prices could react to a full reopening of the Strait of Hormuz.

Analysis

The key mechanism is not gold itself but the discount rate applied to it. When real yields stay sticky, gold behaves like a long-duration asset: ETF inflows slow, systematic trend followers fade, and miners lose both price support and multiple support. That makes the weakest names the high-cost gold producers and royalty streams most exposed to a prolonged sideways-to-down tape, while physical demand is unlikely to rescue the market until macro rates roll over.

Base metals should absorb some of that capital rotation because their earnings are driven more by supply tightness and end-demand than by safe-haven flows. In a regime where policy is still restrictive but not yet recessionary, copper-linked names such as FCX and SCCO can outperform gold proxies simply because the market pays up for tighter concentrate balances and mine disruption optionality. The second-order effect is a relative re-rating from precious-metals exposure toward industrial-metal exposure inside diversified miners.

The contrarian risk is that the market may be too complacent about how fast a growth scare can reverse the whole setup. A weaker labor print, sharper equity drawdown, or dovish shift in TIPS can flip gold from dead money to the cleanest hedge in days, not months; conversely, a stronger China stimulus impulse would extend the base-metals trade. The trade is therefore better expressed as relative value than outright commodity beta, with DXY and 10Y real yields as the main falsifiers.

Key Decisions for Investors

• Long FCX / short GDX for 1-3 months as the cleanest relative-value expression of sticky real rates versus industrial-metal scarcity; target 2:1 upside if 10Y TIPS stay elevated, stop if real yields break meaningfully lower.
• Add SCCO on weakness over the next 2-4 weeks; copper supply tightness should keep earnings more resilient than gold miners even if the Fed stays hawkish. Falsify on a China credit slowdown or a steep copper curve flattening.
• Short GLD tactically only if DXY and real yields continue to grind higher after the next inflation/labor releases; otherwise keep it as a hedge, not a core short. Risk/reward improves on failed rallies rather than on breakdowns.
• If you want optionality, buy FCX call spreads into macro data risk rather than outright commodity exposure; this captures the asymmetry if the market rotates from precious to industrial metals without paying full delta up front.