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Record Gold: J.P. Morgan Enthusiastic About Gold as Rate Climate Shifts

Isaac Nuriani    |
Aug 4, 2023
  • J.P. Morgan says 2024 recession possibilities bode well for gold.
  • Rate cuts could be drivers of gold next year says research note.
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Inflation is by no means finished. But it does seem to be dissipating. And as this chapter of inflation draws to a close, so, too, will one of the fastest cycles of interest-rate increases in four decades draw to a close, as well.[1]

The question on everyone’s mind now is…what’s next? Where, exactly, do things go from here for the economy?

At this point, no one seems to know. Even central bankers have largely abandoned making decisions about what’s next for monetary policy in advance of their actual policy meetings. According to Pierre Wunsch, governor of the National Bank of Belgium, many central bankers no longer trust their economic models.[2]

Still, the Federal Reserve does seem to have just enough confidence to say they believe the deceleration in prices we’re seeing now will translate to rate cuts in 2024. According to the Fed’s most recent Summary of Economic Projections, policymakers’ consensus – such as it is – is that the fed funds rate may be 100 or so basis points under the present level.[3]

The popular and highly regarded FedWatch Tool from CME group points to rate cuts next year, as well. The consensus outlook of the model, which assesses the probability of interest-rate decisions by the Fed, anticipates the target range to be somewhere between 4% and 4.5% by the end of next year.[4]

Where there are declining rates, there tends to be a weaker dollar. Where there tends to be a weaker dollar, there tends to be stronger gold. And that, says global banking giant J.P. Morgan, is precisely what it’s expecting to see next year.

But J.P. Morgan isn’t just looking for stronger gold in 2024. They’re suggesting we could see record gold if the recession many are still predicting actually unfolds.

This week, we’re going to explain more details about J.P. Morgan’s enthusiasm for gold’s near-term prospects, including why Morgan expects gold to thrive even if a bona fide recession doesn’t come to pass. But that’s not all. We’re also going to spend some time discussing how metals actually have acquitted themselves as solid performers throughout much of the new millennium already…and why that may be even more notable than Morgan’s current metals optimism.

First things first, though. The world’s leading investment bank (by revenue) has just said we could see big things from gold in the coming year. Let’s found out why.

J.P. Morgan’s Commodities Director: Look for Rate Cuts to be a “Significant Driver” of Gold in 2024

J.P. Morgan’s robust outlook for gold came by way of a research note authored by Greg Shearer, executive director of global commodities research at the investment bank. As evidence mounts that interest rates will reverse course next year after what has been a strict diet of rate hikes since March 2022, Shearer and other Morgan analysts are forecasting a marked improvement in gold prices as those rates start actually coming down.

Shearer said the declining real yields which will come to pass as a consequence of rate cuts will prove to be a “significant driver” for gold. He expects this scenario to play out in earnest during the second quarter of 2024.[5]

In terms of an actual price target, Shearer and his team say bullion could average $2,175 per ounce during the fourth quarter of 2024. If that’s realized, it not only would surpass the current record price ($2,075) but represent a roughly-10% improvement over present price levels.[6]

“We’re in a very prime place, Shearer said, “where we think gold ownership and long allocation to gold and silver is something that acts as both a late cycle diversifier and something that will perform as we look to the next sort of 12, 18 months.”[7]

Shearer also suggested gold and silver would be “quite agnostic” in terms of their reaction to a slowdown that takes the form of either a soft landing or a hard landing of the economy.[8] What he means is that any slowdown that demands a loosening of monetary policy would act as a fuel source for precious metals, in his estimation.

That said, he underscored that there could be additional upside for metals if the Federal Reserve cuts rates even more aggressively than anticipated next year out of deference to a recession – a “hard landing” – that turns out to be worse than expected.

Additionally, Shearer made clear that his optimistic outlook for gold is based on more than the projected outlook for monetary policy over the next year to year-and-a-half. He specifically referenced the ongoing move by central banks and governments to continue diversifying their reserves with gold as a means to lowering their exposure to both geopolitical and currency risks.

“There’s an eagerness here to really buy in and diversify allocation away from currencies,” Shearer said.[9]

Fundamentally, though, the principal basis for Shearer’s robust metals expectations is his belief that the economy is going to be losing steam over the next year or so, even potentially falling into a full-blown recession.

So, what are the prospects of a recession at this point?

Let’s discuss that next.

Analysts: Whether the Landing Is Hard or Soft, a Potentially Metals-Friendly Downturn Is the Expectation

Will the country be mired in recession next year? It depends on who you ask. And the reason for that is because the economic data seems sufficiently divided on the underlying strength of the economy.

On the one hand, you have a measure like the unemployment rate, for example, which continues to give the impression that the underlying economy is very sound. On paper, at least, the job market looks to be strong. In the U.S., an unemployment rate of 4% and below generally is considered to be “full employment.”[10] The unemployment rate has persisted in that range since December 2021.[11] In fact, it currently is at 3.6%…among its lowest levels in the last 50 years.[12] Perhaps most notable is that the unemployment rate has managed to continue standing tall despite the steady stream of interest-rate increases the Federal Reserve has thrown at it.[

The unemployment rate isn’t the only metric that appears to bode well for the near-term health of the economy. Take, for example, the advance estimate of annualized real gross domestic product (GDP) growth for the second quarter. Last week, the Bureau of Economic Analysis pegged that at 2.4%, significantly faster than economists’ projections and the first-quarter GDP print, both of which were 2% even.[13]

These and other select numbers suggest a continued resilience of the economy; by some measures, it looks to be so resilient, in fact, that some who’ve been forecasting a recession now are changing their tune – the Federal Reserve among them.

Last November, Fed economists said a recession could be “almost as likely” an eventuality as their then-baseline projection of a less-severe slowdown. As the recent round of banking system turmoil unfolded a few months ago, that suggestion became more definite, with Fed economists downgrading their outlook and saying they expected a “mild recession” to unfold later on in 2023.[14]

But it now appears the Fed has revised their expectations, once again, shifting back toward an expectation of slower growth that does not include an outright recession.

“So the staff now has a noticeable slowdown in growth starting later this year in the forecast,” Fed Chair Jerome Powell said last week in reference to the central bank’s economists, “but given the resilience of the economy recently, they are no longer forecasting a recession.”[15]

Not all observers agree that a recession will be avoided, however. Although The Conference Board acknowledges an improved economic outlook in the shorter team based on the better-than-expected Q2 GDP estimate, resiliency in consumer-spending numbers and gains in the board’s consumer confidence index, it still expects a mild recession as 2023 turns to 2024.[16] Among the criteria driving the board’s sentiment are inflation’s continued stubbornness, interest rates that should remain high for now and the continued eating-away of pandemic savings that many experts say has been responsible for propping up consumer spending numbers this year.[17]

Other data suggesting recession is not a case of “if,” but of “when,” includes the Institute for Supply Management’s manufacturing purchasing managers’ index (PMI), which declined for the ninth straight month in July.[18]

It’s not difficult, then, to understand why uncertainty is such a prominent characteristic of the economy right now – and why it likely will remain a prominent characteristic for some time to come. However – and this is important, in my opinion – uncertainty about the specific issue of whether we’ll see an actual recession does not suggest a great possibility that we won’t see a meaningful downturn at all. Note that even the same Fed economists who no longer have a recession on their radar screen still expect at least a “noticeable slowdown in growth,” according to Jerome Powell.

Remember: “Soft landing” is not a synonym for “everything is just fine”; it refers to a slowdown that is not overtly recessionary in nature – but remains a slowdown, nevertheless.

And that, says J.P. Morgan’s Greg Shearer, is enough to send interest rates in a more accommodative direction…and precious metals significantly higher.

But while some might be particularly enthusiastic about Shearer’s outlook, it may be worth noting that any prospective uptick in metals over the next year would hardly be the first of its kind in recent history. The fact is that although gold and silver still tend to live outside of the mainstream, metals have quietly but resolutely acquitted themselves as productive assets throughout not only what has been a particularly unsettled period for the economy recently, but throughout the millennium, as well.

For those who are pondering ways to better-optimize their retirement savings, adopting such a “macro” perspective might make even more sense than making a great deal of what J.P. Morgan or anyone else thinks metals might do in the year to come.

Metals in the Millennium: Gold Up More Than 600% Since January 2001

When one of the world’s most storied investment banks speaks glowingly of the prospects for precious metals, it’s understandable that people take notice. After all, as an asset class, metals fit the profile of “alternative assets” not only in terms of their technical classification, but in how they’re perceived, as well. The bottom line is that there tends not to be a great deal of “mainstream” attention that regularly accrues to gold and silver.

But a closer look at how gold – and silver – have behaved recently raises the possibility that those content to look past metals entirely may be doing themselves something of a disservice.

The notion that gold could, in the view of J.P. Morgan, appreciate at least 10% through next year is worth considering, in my view. But it could prove even more notable for those who’ve owned gold for the previous 12 months. Over that time, the price of gold already has climbed about 10%. As a matter of fact, the price of silver has surged roughly 18% over the same period.[19]

Take a look at the performance of silver and gold over the last five years, and you’ll find that the metals have appreciated roughly 55% and 60%, respectively on a price-return basis.[20]

Go back even further, to, say, the beginning of the millennium, and it turns out that the price of gold has climbed more than 600% since 2001.[21]

This isn’t to say that metals are solid performers all the time. They’re not. In fact, there have been periods when the performance of gold and silver has been less than overwhelming.

But just as that’s true, so is it true that metals often have, on plenty of occasions, shined particularly bright…including during periods when unpredictability has been a central characteristic of the prevailing economic environment. For some retirement savers, recognizing the potential of metals to thrive as core assets may be of even greater overall value than focusing on how they might perform during briefer periods of acutely optimal conditions


[1] Jeff Cox, CNBC.com, “Inflation rose just 0.2% in June, less than expected as consumers get a break from price increases” (July 13, 2023, accessed 8/3/23); Medora Lee, USA Today, “Another Fed rate increase squeezes big spenders, but penny pinchers win. Here’s why.” (July 27, 2023, accessed 8/3/23).
[2] Eshe Nelson, New York Times, “At the Front Lines of the Inflation Fight, Uncertainty Reigns” (July 3, 2023, accessed 8/3/23).
[3] FederalReserve.gov, “Summary of Economic Projections” (June 14, 2023, accessed 8/3/23).
[4] CME Group, “CME FedWatch Tool” (accessed 8/3/23).
[5] Neils Christensen, Kitco.com, “JPMorgan Chase sees gold prices at record highs in 12 to 18 months” (July 26, 2023, accessed 8/3/23).
[6] Sybilla Gross, Yahoo Finance, “JPMorgan Sees Gold Charging to Records in 2024 as Fed Cuts Rates” (July 26, 2023, accessed 8/3/23).
[7] Christensen, “JPMorgan Chase sees gold prices at record highs.”
[8] Ibid.
[9] Ibid.
[10] Tim Smart, U.S. News & World Report, “2022 Sees a Labor Market Reaching Full Employment” (January 10, 2022, accessed 8/3/23).
[11] Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey” (accessed 8/3/23).
[13] Jeff Cox, CNBC.com, “GDP grew at a 2.4% pace in the second quarter, topping expectations despite recession calls” (July 27, 2023, accessed 8/3/23).
[14] Reuters, “Fed staff drop US recession forecast, Powell says” (July 26, 2023, accessed 8/3/23).
[15] Ibid.
[16] The Conference Board, “The Conference Board Economic Forecast for the US Economy” (August 2, 2023, accessed 8/3/23).
[17] FitchRatings.com, “U.S. Consumption Boost from Pandemic Savings Expected to Fade” (June 15, 2023, accessed 8/3/23).
[18] Institute for Supply Management, “Manufacturing PMI® at 46.4%; July 2023 Manufacturing ISM® Report On Business®” (August 1, 2023, accessed 8/3/23).
[19] London Bullion Market Association, “Precious Metal Prices,” (accessed 8/3/23).
[20] Ibid.
[21] Ibid.

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