Gold Could Rebound If Real Interest Rate Pressure Eases, Says Jefferies
Gold prices may be poised for a recovery if pressure from rising real interest rates begins to ease, according to a new analysis from Jefferies. After several months of losses, the precious metal is now trading near the $4,000 per ounce level, with interest rate expectations remaining the key driver of investor sentiment.
Jefferies noted that the historical relationship between gold prices and real interest rates has re-emerged, making monetary policy expectations a crucial factor for the precious metal. As real yields rise, the opportunity cost of holding non-yielding assets such as gold increases, often weighing on prices. However, history suggests that once real rate pressures begin to fade, gold and gold mining stocks tend to outperform over the following year.
The investment bank highlighted that the market has undergone a dramatic shift in interest rate expectations since the beginning of 2026. Earlier forecasts anticipated one or two Federal Reserve rate cuts, but markets are now pricing in one or two potential rate hikes. This reversal has contributed to an estimated 25% decline in gold prices from their record highs, while weaker central bank purchases during the first quarter of 2026 also reduced support for the metal.
Jefferies examined previous periods of sharply rising real interest rates, including the 2013 taper tantrum, the 2018 real-rate peak, and the 2022 Federal Reserve tightening cycle. During these episodes, gold prices fell by 22.9%, 5.0%, and 6.7%, respectively, while gold mining equities experienced even steeper declines of 35.3%, 17.0%, and 28.6%.
Although short-term performance was negative in each case, the following 12 months produced mixed results. Gold mining stocks showed little recovery after the 2013 sell-off, surged following the 2018 peak, and posted a moderate rebound after the 2022 tightening cycle. According to Jefferies, the determining factor was whether real interest rate pressure eased after reaching its peak.
Current market data show that the 10-year TIPS real yield stands near 2.41%, while the Cleveland Fed's 10-year real interest rate is around 2.08%, both significantly higher than levels seen at the start of 2026. Meanwhile, the 10-year breakeven inflation rate remains relatively stable at approximately 2.27%. Reflecting the challenging environment, the SPDR Gold Shares (GLD) ETF has declined about 13% over the past three months, while the VanEck Gold Miners ETF (GDX) has fallen roughly 17%.
Despite the recent weakness, Jefferies believes the market has already absorbed much of the impact from higher real interest rates. Unlike previous rate-driven sell-offs, gold now benefits from several structural tailwinds, including stronger central bank buying during the second quarter of 2026, persistent geopolitical tensions, growing fiscal concerns, continued de-dollarization efforts, and increased investor allocations to hard assets.
The firm also noted that interest rate markets remain heavily skewed toward tighter monetary policy, with implied rates rising into 2027 and markets assigning a relatively high probability of further Federal Reserve tightening. However, Jefferies cautioned that this outlook could shift rapidly if geopolitical tensions—particularly the conflict involving the United States and Iran—ease, potentially reducing inflation risks and changing the path of monetary policy.
While higher real interest rates continue to challenge the gold market in the near term, Jefferies argues that easing rate pressure could provide the catalyst for a meaningful recovery in both bullion and gold mining stocks over the coming year.
