State Street Lowers Probability of Gold Reaching $5,500 to 60%

State Street Investment Management maintained its baseline forecast for gold to reach the range of $4,750 to $5,500 per ounce by the end of the first quarter of 2027, but lowered the probability of this scenario occurring to 60 percent from 70 percent in a previous report. Conversely, it assigned a 35 percent probability to a bearish scenario that sees the metal between $4,000 and $4,750 over the next six to nine months.

This caution comes after a difficult month for precious metals, as spot gold prices fell 6.3 percent in September, silver dropped 9.2 percent, and commodities overall declined 0.6 percent. Despite this, US-listed gold ETFs attracted $11.7 billion in the third quarter, including $3.7 billion in September alone, more than offsetting the $5.6 billion outflow recorded in the second quarter.

The report noted that China's consumer gold imports reached a record 1,141 metric tons during the first eight months of the year, providing evidence that Asian demand for the yellow metal remained solid even amidst fluctuating global prices.

This pricing comes at a time when the US Federal Reserve raised interest rates by 25 basis points in September, and market expectations shifted from a cumulative 1.5 rate hikes to 3.3 hikes over the next nine months, a shift that exerts pressure on non-yielding assets and makes the bullish scenario for gold less likely than it was at the start of the year.

What do these terms mean?

Baseline scenario: The most likely forecast built by an analyst on a specific path for the economy, contrasted with a less probable alternative scenario.

Exchange-Traded Fund (ETF): A fund traded on an exchange like a stock that tracks the price of a commodity such as gold, allowing you to buy shares in it instead of holding the physical metal.

Basis point: A small unit of measurement for interest rates, equal to one-hundredth of one percent, used to express small changes in interest rates.