Gold remains the number one topic in commodity markets: Despite prices exceeding 4,300 US dollars per ounce, JPMorgan continues to see tailwinds for the precious metal. In recent media statements, strategists at the US bank explain why supply and demand support the gold price – and why investors should soberly assess gold’s role in their portfolios.
Gold in Focus: Interest Rate Cycle, Dollar, and Central Banks
Marcella Chow, Market Strategist at JP Morgan Asset Management, for example, points to a combination of the monetary policy environment and structural demand. Crucial factors are the ongoing interest rate cutting cycle in major economies and a weaker US dollar development in the medium term. Historically, both often have a positive effect on gold, as falling real interest rates reduce the opportunity cost of holding the precious metal, and a softer dollar would support international buyers.
On the demand side, Chow highlights several pillars: sustained central bank purchases – particularly in emerging markets –, robust jewelry demand in China and India, and a broader interest from institutional investors overall. Taken together, this provides “supportive fundamentals” for gold, even at current high gold prices.
Supply Remains Tight: Mining Sector as a Bottleneck
In addition to demand, the supply side comes into focus. According to Chow, the physical supply of gold is limited. For years, the global mining sector has faced geological, permitting, and cost-related hurdles. New large deposits are rare, and project startups are taking increasingly longer. As a result, annual primary production is growing far less dynamically than, for example, the money supply or global debt. For the gold market, this means: Even with stable demand, a rigid supply curve can amplify upward price movements.
At the same time, market participants point out that recycling flows – traditionally a buffer during high prices – do not automatically increase proportionally with the price. Cultural and seasonal effects, for example in the jewelry sector, play a role here. This also underscores that gold’s supply elasticity remains limited.
Diversification, not a Shield: how Gold should be Classified in a Portfolio
Despite the positive supporting factors, JPMorgan urges a factual assessment. Gold does not generate ongoing returns and can fluctuate significantly in the short term. Furthermore, the often-assumed negative correlation with equities across various market phases is less stable than widely believed. From the bank’s perspective, gold can therefore contribute to diversification in asset allocation – but less so as a reliable hedge against every form of market fluctuation.
This assessment is also reflected in other statements from the firm. JPMorgan CEO Jamie Dimon stated on October 14 that it might be justifiable to add gold to portfolios in the current mixed environment – although he does not consider himself a typical gold advocate. Dimon stated that
Already in May, Grace Peters, Global Head of Investment Strategy at JPMorgan, had highlighted gold’s role in a diversified, geographically broader allocation. Her team then saw an environment of moderate growth and cautious interest rate cuts – a constellation in which gold could be well supported for structural reasons. She specifically cited ongoing purchases by central banks from emerging markets and potential inflows into exchange-traded products (ETFs) as price drivers. Furthermore, demand impulses from jewelry and technology applications could remain robust with positive economic development.
Outlook: What is Moving the Gold Price Now
In the short term, data points on inflation, the labor market, and communication from major central banks are likely to shape expectations for interest rate developments – a key driver for gold. Currency developments also remain important: a weakening US dollar makes the precious metal cheaper for buyers outside the US. On a structural level, market observers are keeping an eye on the net purchases by central banks, as these influence the fundamental demand side for gold.
Gold thus remains a globally traded tangible asset, whose price is determined by macroeconomic factors, central bank activity, jewelry and industrial trends, and the development of mining supply. JPMorgan’s statements paint a picture in which fundamental support continues – but at the same time, gold’s role in a portfolio should be understood as a building block for diversification and not as a universal “safety net”.
