TD Securities: Gold Price May Retest the 4,200 Level in the Short Term, Expected to Reach $5,350 by 2027

TD Securities pointed out in its latest commodity strategy report that despite the recent weakness of the US dollar, the gold market still faces significant short-term downward pressure. After Federal Reserve Chairman Kevin Warsh sent out strong hawkish signals, the market's repricing of monetary policy has become the core factor driving gold prices, causing the traditional “weaker dollar, higher gold” correlation to decouple at this stage.

At the Jackson Hole annual meeting, Warsh reiterated the Federal Reserve's firm determination to bring inflation back to the 2% target. He stated clearly that the current financial environment has not yet reached a sufficiently tight level, and there is not enough evidence of cooling inflation. As a result, the market swiftly revised its previous optimistic expectations, and current pricing reflects the possibility of the Federal Reserve raising interest rates in both September and December this year. This shift in expectations has significantly pushed up short-term US Treasury yields, causing gold prices to remain under pressure and fluctuate around $4,430 recently.

According to TD Securities analysis, the challenge currently facing gold investors lies in a shift of driving factors. In the past, investors tended to seek safe-haven support for gold through the “dollar depreciation trade,” but as the Federal Reserve has emphasized its responsibility for price stability, this narrative is gradually being marginalized by the market. In other words, in an environment dominated by rising interest rate expectations, a weaker US dollar alone is no longer sufficient to provide effective rebound momentum for gold prices.

From a deeper bond market logic, although the US Treasury’s interventions in the long end of the bond market have somewhat alleviated financial tightening pressure and previously provided some support for gold, this force can no longer offset the heavy drag caused by rising short-term interest rates. Based on this, TD Securities expects that by the end of this year, gold prices may move further towards the lower edge of the $4,200 to $4,700 trading range.

However, TD Securities emphasizes that this short-term pain does not signify the end of the long-term bullish logic. The report defines the current volatility as a “repricing phase” rather than a trend reversal. The institution still maintains a long-term bullish outlook on gold and has set a grand target of $5,350 for the third quarter of 2027.

This long-term logic is based on the assumption that inflation will eventually stabilize and the oil market will return to balance. TD Securities analysis indicates that when the high interest rate environment begins to substantially suppress total demand, the Federal Reserve will gain more policy space to reverse the tightening cycle so as to fulfill its responsibility of maintaining full employment. Once this policy turning point is established, strong demand from global central banks, institutional investors, and physical retail buyers will collectively drive a new round of structural increases in gold prices.

The market remains highly attentive to the policy direction under Trump’s tenure and to the Federal Reserve’s subsequent moves. TD Securities recommends that investors focus on the upcoming non-farm payroll data and inflation indicators, as these will determine whether gold prices can stabilize in the $4,200 support range.

TD Securities US rates strategist Molly Brooks stated: “If we see labor market indicators remain stable or even strengthen next week, and the subsequent inflation data is also stronger, then this will send a signal that Warsh may also be preparing to take action.”