Gold's Resilience in a Deteriorating Rate Cut Outlook

In an economic landscape marked by divergent inflationary pressures, geopolitical volatility, and central bank uncertainty, gold has emerged as a compelling asset for investors seeking refuge from macroeconomic turbulence. As global growth slows and policymakers grapple with the delicate balance between rate cuts and inflation control, the yellow metal's role as a hedge against both inflation and systemic risk has never been more pronounced.

According to J.P. Morgan Research, gold prices are projected to climb to an average of $3,675 per ounce by Q4 2025, with a potential surge toward $4,000 by mid-2026. This trajectory is underpinned by robust demand from central banks, which are expected to purchase 900 tonnes of gold in 2025-a response to macroeconomic uncertainty and a strategic shift away from U.S. dollar reserves. Meanwhile, private investors are also flocking to gold, with ETF inflows and physical holdings in bars and coins rising sharply. The metal's dual function as both an inflation hedge and a safe-haven asset is particularly relevant in an era of U.S. tariffs and geopolitical instability.

The Federal Reserve's September 2025 projections underscore the fragility of the current rate-cut outlook. The median forecast for GDP growth stands at 1.6% in 2025 and 1.8% in 2026, with the federal funds rate expected to decline to 3.6% and 3.4%, respectively according to the Federal Reserve. However, these cuts are tempered by the reality that U.S. core PCE inflation is projected to remain stubbornly high at 3.4% by year-end. This divergence between growth and inflation-a hallmark of stagflationary risks-creates a fertile environment for gold, which historically thrives when monetary policy is caught between a rock and a hard place.

The OECD's global economic outlook further complicates the picture. While the organization anticipates a slight slowdown in global growth to 3.2% in 2025 and 2.9% in 2026, it warns that trade tensions and policy uncertainty will weigh heavily on demand. Central banks, including the Fed, the ECB, and the Bank of England, are expected to adopt a more accommodative stance over the next 12 months, with the U.S. policy rate projected to fall from 4.50% in August 2025 to 3.25% by August 2026. Yet, as the OECD emphasizes, fiscal discipline and structural reforms will be critical to avoiding long-term stagnation.

For investors, the strategic positioning in gold is not merely speculative-it is a calculated response to a world where traditional safe-haven assets like Treasuries are losing their luster. The metal's performance in Q3 2025, which saw prices rise to $3,247 per ounce from $3,150 in the prior quarter, highlights its resilience amid a backdrop of volatile rate expectations. Analysts caution, however, that gold's trajectory may remain volatile, with some predicting an average of $4,500 per ounce through 2027 before a potential correction to $2,400 by 2029.

The key takeaway is clear: in a regime where growth is subpar and inflation remains "uncomfortably firm" according to J.P. Morgan, gold's role as a portfolio diversifier and inflation hedge is indispensable. For central banks, it represents a hedge against dollar devaluation; for investors, it offers a tangible store of value in an era of intangible risks. As the OECD and IMF both acknowledge, resolving trade conflicts and fostering open markets will be essential to stabilizing global growth. Until then, gold's allure is unlikely to wane.