Fiscal risks and stagflation fears will support gold prices even without Fed rate cuts – HSBC

• Gold experienced significant volatility in early 2026, dropping from $5,415/oz to $4,400/oz during Middle East conflict, with the US dollar absorbing most safe-haven demand rather than gold during the risk-off phase
• Rising US debt (near 100% of GDP in 2025 per IMF estimates) and global defense spending increases are encouraging demand for hard assets and providing longer-term support for gold prices
• High gold prices are reshaping physical markets, with jewelry demand weakening while institutional demand for large bars remains firm, supported by regulatory changes in India and China

Summary: HSBC Sees Long-Term Gold Support Despite Rate Cut Absence

HSBC maintains a bullish medium-to-long term outlook on gold despite recent volatility and no expected Federal Reserve rate cuts through 2027. According to FX and Commodities Strategist Rodolphe Bohn, gold prices fell from $5,415 per ounce in late January 2026 to $4,400 by March 26 amid Middle East conflict escalation, but rebounded quickly following the recent ceasefire.

Key Drivers Supporting Gold:

Fiscal Concerns: Rising government deficits and debt levels are encouraging hard asset demand. IMF estimates place U.S. debt near 100% of GDP in 2025, with increased global defense spending adding to debt burdens. These fiscal dynamics provide long-term price support.

Stagflation Risks: While high real yields typically pressure non-yielding gold, stubborn inflation combined with growth threats creates supportive conditions. HSBC expects Fed policy rates to remain unchanged through 2027, which may limit upside but won't prevent gains.

Central Bank Demand: Though cooling from 2022-2024 peaks, with some banks selling to preserve FX reserves amid higher energy and defense costs, long-term diversification policies should reassert themselves later in 2026.

Market Dynamics: Gold's relationship with oil and the U.S. dollar has proven complex during the recent crisis. Physical demand is shifting, with jewelry demand weakened by high prices while institutional demand for large bars remains firm, supported by regulatory changes in India and China. Mine output and recycling are expected to increase modestly in 2026-2027.

Near-term outlook depends on Middle East de-escalation, oil price stabilization, and reduced financial stress. However, geopolitical risk, fiscal pressures, and central bank buying underpin HSBC's constructive long-term view.