Gold Recovery Hinges on Easing Real Rate Pressure, Jefferies Says

Gold's recent downturn could see a reversal if pressure from rising real interest rates subsides, according to a new report from investment bank Jefferies. The firm's analysis identifies the path of interest rates as the primary factor influencing gold prices through its effect on investment demand.

The Real Rate Squeeze

Jefferies notes that gold prices have sold off by approximately 25% from their peak levels, driven by a significant shift in interest rate expectations since the beginning of 2026. The market has moved from anticipating one to two rate cuts to pricing in one to two rate hikes, which has materially increased real rates.

Higher real rates raise the opportunity cost of holding non-yielding assets like gold. This dynamic is reflected in the performance of gold-related ETFs, with the SPDR Gold Shares (GLD) falling 13% and the VanEck Gold Miners ETF (GDX) declining 17% over the past three months, according to the report.

A Historical Perspective

Jefferies examined previous periods of sharply rising real rates and found a consistent pattern of initial underperformance for gold and gold equities. However, the subsequent 12-month performance varied significantly based on whether rate pressures eased.

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• 2013 'Taper Tantrum': Gold fell 22.9% and gold equities fell 35.3% in the first three months; miners saw a minimal recovery afterward.
• 2018 Real-Rate Peak: Gold declined 5.0% and equities dropped 17.0%; miners surged in the following year as pressure subsided.
• 2022 Tightening Cycle: Gold dipped 6.7% and equities fell 28.6%; a modest recovery followed.

Outlook and Supporting Factors

While rate markets currently imply a bias toward tighter monetary policy, Jefferies suggests that the initial shock of higher real rates may have been absorbed by the market. The firm argues that gold now has more underlying support than in previous rate-driven downturns.

These supporting factors include strong central bank buying, as indicated by second-quarter 2026 data, as well as persistent geopolitical uncertainty, fiscal concerns, and a broader trend toward de-dollarization and hard asset allocation. These elements could provide a floor for prices even if rates remain elevated.