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Gold could remain under pressure through the end of 2026 as rising oil prices, persistent inflation and higher interest rates weigh on the precious metal, according to Natixis. The bank says the ultimate direction may depend heavily on developments surrounding the Strait of Hormuz.

In its latest gold report, Bernard Dahdah, Precious Metals Analyst at Natixis, outlined three possible paths. They range from a bearish fall to $3,500 an ounce to a bullish advance above $5,250 an ounce.

The new outlook marks a substantial change from late August, when Dahdah raised his year end gold target to $5,000 an ounce. At that time, concerns about U.S. debt and instability in the bond market were providing firm support for gold.

Dahdah previously said concerns about fiscal sustainability and currency debasement were helping the metal overcome elevated opportunity costs. Since then, however, Natixis says the broader economic environment has changed sharply.

Gold has again developed a negative correlation with oil prices, according to the bank. Higher crude prices are intensifying inflation concerns and driving expectations that the Federal Reserve may need to raise interest rates further.

That shift raises the opportunity cost of holding gold, which does not provide a yield. The relationship initially appeared at the beginning of the conflict involving the U.S., Israel and Iran, then broke down after diplomatic breakthroughs in June.

The dynamic returned in late August and has strengthened amid renewed geopolitical tensions. Natixis linked the renewed pressure to the U.S. rejection of Iran’s latest proposal following the United Nations General Assembly.

Gold investors have also become especially sensitive to changing expectations for Federal Reserve monetary policy. Charts included in the Natixis report show gold weakening as expectations for another interest rate increase have grown.

Higher bond yields and a stronger U.S. dollar are adding pressure. Natixis said the relationship between gold and the U.S. 10 year Treasury yield reappeared in late August, while gold’s most stable relationship this year has been with the U.S. Dollar Index.

Even after the selloff, investors have continued to show interest in the precious metal. Holdings in physically backed gold exchange traded funds have risen while prices declined, a divergence the bank described as historically rare.

“Some investors are buying the dip (ETFs), but structural demand is unable to offset the rates-driven repricing,” Dahdah said in the report.

Central bank activity could also alter gold’s direction. Natixis noted that strong official sector purchases previously helped gold rally despite elevated bond yields, but persistent oil strength and a firm dollar could change those priorities.

Central banks may focus instead on containing inflation and supporting their currencies, rather than buying additional gold. Some countries could even liquidate reserves to defend their currencies, turning central banks from buyers into net sellers.

Under Natixis’ base case, gold remains under pressure through the rest of 2026 as the Federal Reserve considers another interest rate increase in December. The bank sees gold falling toward $4,100 an ounce by year end.

Natixis assumes the Federal Reserve will leave interest rates unchanged in 2027. Continued de dollarization, renewed investor demand and central bank purchases would then lift gold to about $4,750 an ounce by the end of next year.

The bear case centers on an escalation in the Middle East that closes the Strait of Hormuz. Such an outcome would send oil prices higher, keep inflation elevated and force interest rates to remain higher for longer.

If that pressure were accompanied by central bank selling, Natixis sees gold potentially dropping as low as $3,500 an ounce. That scenario combines higher oil prices, persistent inflation, restrictive monetary policy and official sector liquidation.

The bullish scenario depends on conditions in the Strait of Hormuz returning to normal. Natixis says oil prices would collapse, accelerating disinflation and giving the Federal Reserve room to move away from its tightening position.

In that environment, the bank expects gold to settle above $5,250 an ounce. The three scenarios leave the precious metal’s outlook tied closely to oil, inflation, monetary policy and central bank demand.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.