HSBC cut its average gold price forecast for 2026 and 2027, citing a stronger US dollar and a change in expectations for a more hawkish US Federal Reserve, a Reuters report said.

The bank cut its average gold price forecast for 2026 to $4,560 an ounce from $4,864, while cutting its 2027 forecast by $5,000 to $4,925.

HSBC expects gold to trade in a range of $3,800 to $4,700 an ounce for the remainder of 2026, with the metal hovering around $4,750 later this year. It also projects gold to finish at $5,025 an ounce in 2027.

Spot gold was trading near $4,100 an ounce as of 0730 GMT, down 20% from a record high of $5,594.82 on January 29. Reuters reported that the earlier rally was driven by inflation concerns linked to the Middle East conflict, which contributed to more hawkish expectations of US monetary policy.

According to Reuters, HSBC believes that changing perceptions around US monetary policy and the resulting strength in the US dollar are the main drivers behind the liquidation of gold holdings by investors and the subsequent decline in prices.

The bank also noted that the central bank has reduced gold purchases after playing a significant role in supporting the precious metal’s boom in recent years. However, it said long-term reserve diversification by central banks could continue to support underlying prices.

HSBC added that heavy outflows from gold-backed exchange-traded funds (ETFs) recorded during the first half of the year may partially reverse in the second half, providing some support to the market.

Despite lowering its forecasts, the bank believes downside risks to gold may be limited, as much of the market has adjusted to the higher interest rate environment and stronger US dollar.

HSBC also looks at several structural factors that supported gold before the Middle East conflict, including concerns about fiscal deficits, economic uncertainty and elevated sovereign debt levels.

While geopolitical developments related to Iran may continue to put pressure on gold prices in the near term, HSBC believes that any decline due to those tensions alone is unlikely to last long-term.