Precious Metals Under Pressure: Fed Hawkishness Triggers a Chain of Gold Target Cuts
As the Fed's latest hawkish tilt weighs on markets, gold continues to trade near this year's lows. After Goldman Sachs and Deutsche Bank, BMO Capital Markets has also joined the wave of institutions cutting gold price targets, and the global precious metals market is under unprecedented adjustment pressure.
I. BMO Makes a Sharp Cut to Its Short-Term Gold Target
In its latest third-quarter commodities outlook, BMO Capital Markets cut its average gold price forecast for the second half of this year by 5% to $4,625/oz. The adjustment reflects the current macro headwinds facing precious metals. However, the bank's analysts said that if low oil prices can hold and support a rebound in emerging-market demand, spot gold still has room to recover.
Importantly, BMO has not lost confidence in gold's long-term outlook. The bank kept its long-term view unchanged, saying gold is expected to return above $5,000 in Q1 2027, and forecasting average gold prices of around $4,200/oz in next year's second and third quarters. The analysts stressed: "Although market sentiment may still be influenced by macro swings and geopolitical developments in the short term, we believe precious metals can regain momentum as conditions stabilize." The main risk now is a prolonged escalation in the Middle East, especially potential disruption to energy supply and its transmission into inflation and rates.
II. Silver Targets Also Come Under Pressure
BMO also cut its short-term silver outlook, expecting average silver prices of about $69/oz in Q3 and a mild recovery to $71/oz in Q4. The bank expects the recovery trend in silver to continue into early 2027 and to peak in next year's second quarter at an average of about $74.80/oz. The analysts noted: "Silver continues to benefit from its industrial characteristics, with ongoing investment in power infrastructure and electrification supporting potential demand." Still, the market needs to closely watch macro drivers such as rates and geopolitical risks, as well as the durability of industrial demand.
III. Fed Rate-Hike Risk Becomes the Top Headwind
BMO made clear that U.S. monetary policy remains the biggest and most immediate threat to gold and silver prices. Although the Fed left rates unchanged at its latest meeting, it signaled at least one rate hike this year. The Iran conflict has pushed up energy prices and intensified inflation concerns. Fed Chair Kevin Warsh stressed his focus on price stability, triggering a repricing wave in markets: the 2-year Treasury yield surged 13 basis points, its biggest one-day gain since April 2025, and markets also strengthened expectations for a 25-basis-point hike before October.
BMO's economics team now expects the Fed to cut rates by 25 basis points in September and December 2027, pushing the timeline back by nine months from earlier forecasts. "For now, rate cuts remain a distant prospect, and many economies are actually hiking. All else equal, that is a macro headwind for metals."
IV. Multiple Banks Turn Cautious Together
Recently, several global investment banks have lowered gold targets in succession. Deutsche Bank cut its gold price forecasts for the third and fourth quarters of this year by 22%; Goldman Sachs cut its 2026 year-end gold forecast by $500 to $4,900/oz, citing expectations that the Fed will not cut rates this year. Bank of America, UBS, and Morgan Stanley have also turned cautious on gold, saying a sharp short-term rally is unlikely and downside risks are rising.
As of Wednesday in Asia trading, spot gold fell more than 1.02% to $4,068.36/oz, having already dropped about 28% from its all-time high near $5,600 reached in late January this year. Although gold faces near-term risk, BMO believes it will continue to benefit from the global de-dollarization trend. Buying gold is often an important step in that wave, providing a solid foundation for the long-term value of precious metals.
