Gold could trade above $4,000/oz near term, HSBC says

HSBC projects gold could trade above $4,000 per ounce in the near term, driven by escalating geopolitical risks, fiscal uncertainties such as the U.S. government shutdown, and threats to Federal Reserve independence. The bank anticipates rallies could extend into 2026, supported by continued official sector buying and robust institutional demand for gold as a diversifier, following a recent record high of $3,896.49. However, HSBC cautions that fewer-than-projected Fed rate cuts could potentially curb the price rally.

Analysis

Oct 3 (Reuters) - HSBC said gold could trade above $4,000 per ounce in the near term, driven by geopolitical risks, fiscal uncertainties, and threats to the Federal Reserve’s independence. "Rallies can continue into 2026 aided by official sector buying; institutional demand for gold as a diversifier can stay robust," the bank said in a note dated Friday. Get a daily digest of breaking business news straight to your inbox with the Reuters Business newsletter. Sign up here. Spot gold scaled a record high of $3,896.49 on Thursday amid elevated uncertainty from a U.S. government shutdown and rising expectations of interest rate cuts. Advertisement · Scroll to continue The U.S. Senate will vote again on Friday on dueling Democratic and Republican plans to end a government shutdown now entering its third day, though there is no sign that either plan will win passage. The shutdown, the 15th since 1981, has suspended scientific research, economic data reports, financial regulation, and a wide range of other activities. Meanwhile, concerns over the Fed’s independence have intensified following U.S. President Donald Trump’s attempt to fire Fed Governor Lisa Cook, raising fears of political interference in monetary policy decisions. HSBC said that if the Fed delivers fewer rate cuts than currently projected this year and next, it could potentially curb gold’s price rally. Advertisement · Scroll to continue Gold, often seen as a safe store of value during times of uncertainty and favored in a low-interest-rate environment, has gained over 47% so far this year. Looking ahead to 2026, HSBC said central banks are expected to remain strong buyers of gold, supported by geopolitical risks and efforts to diversify away from the dollar, although purchases may ease from the peak levels seen between 2022 and 2024. Reporting by Ashitha Shivaprasad and Anushree Mukherjee in Bengaluru Our Standards: The Thomson Reuters Trust Principles. HSBC has issued a bullish near-term forecast for gold, projecting prices could surpass $4,000 per ounce. This outlook is predicated on a confluence of factors, including heightened geopolitical risks, fiscal instability highlighted by the U.S. government shutdown, and perceived threats to the Federal Reserve's independence. The precious metal has already demonstrated significant momentum, gaining over 47% year-to-date and recently reaching a record high of $3,896.49. The bank's analysis suggests this rally could be sustained into 2026, supported by structural demand from central banks seeking to diversify reserves away from the U.S. dollar and robust institutional interest in gold as a portfolio diversifier. However, a key risk to this forecast remains monetary policy; HSBC cautions that if the Federal Reserve implements fewer interest rate cuts than currently anticipated, it could cap the potential for further price appreciation, as gold's appeal is enhanced in a low-rate environment.

Key Decisions for Investors

• Given the strong bullish drivers and a price target above $4,000, investors may consider maintaining or initiating long positions in gold as a tactical play on current market uncertainties.
• It is critical to monitor Federal Reserve communications and forward guidance, as a less dovish policy stance with fewer rate cuts than expected represents the primary headwind that could derail the gold rally.
• Investors should assess their portfolio's allocation to gold as a strategic hedge, particularly against the specific fiscal and political risks identified, such as the U.S. government shutdown and potential political interference with monetary policy.