Source: kitco
Date: May 08, 2025
By: Ernest Hoffman
(Kitco News) – Geographic and currency diversification is the key to successfully navigating today’s markets, and gold is expected to hit $4,000 per ounce in a base-case scenario where U.S. and global GDP is rising over the next 12 months, according to Grace Peters, global head of investment strategy at JPMorgan.
Peters acknowledged that there is a degree of optimism about a potential trade deal with China already priced into U.S. equities.
“We’re obviously looking at an S&P that is only 3% or 4% from the highs, but this undoubtably would be good news,” she told Bloomberg Television in a Wednesday interview. “Our sense is that the current status quo with China, that the tariff rates are prohibitively high, so negotiation is good. It’s likely to come down to still high levels, but overall, that will bring the US effective tax rate, we think, to more like mid-teens level, which is a situation where the U.S. and global GDP continue to grow, corporate earnings can continue to be strong and therefore very much should be welcomed by the markets and risk assets more broadly.”
But Peters also stressed that it’s more than just a U.S. story, as there are other things going on in the background. “The big debate really is how much of the current U.S. administration’s changes are going to be cyclical versus structural,” shew said. “And as part of that bigger debate, when we’re thinking about which bits of the pullback investors will want to buy, geographic diversification is one of the key themes, and European equities as well as U.S. equities should benefit.”
Peters said JP Morgan is now in the process of setting its price targets for the next 12 months, and she’s optimistic about U.S. equities and the support they should receive from the Federal Reserve.
“I think the S&P could easily reach the highs that it saw in February, if not progress a little bit further to meet new highs over that time horizon,” she said. “We expect two cuts this year, two more cuts next year. That takes you down to a terminal rate of about 3.5%. If growth is weaker, obviously they’ve got room to cut more. But I also think the Fed is a little bit constrained by some of the inflation dynamics, particularly consumer inflation expectations.”
“The notion that growth is going to be positive, corporate earnings will be positive, the Fed will cut a bit, but not extensively, is the backdrop that we see, is what lands us to this notion of geographic diversification, still being pro-risk here, but in an intentionally diversified way.”
When asked how JP Morgan is looking at gold in this environment, Peters said “We still like it.”
“There’s a few different things we’re trying to solve for,” she explained. “U.S. overweight positions is one, so diversifying by geography and by currency is one of the elements, but also just broader geographic hedging. And there’s definitely been a way over the last couple of years as to how gold has traded, and we think that those structural changes are likely to keep playing out.”
“We came into this year with a price target for gold of $3,500,” Peters said. “We’ve just broken through that now. So again, looking 12 months forward, north of $4,000, we think, would be a new reasonable price target for gold, with key drivers being still emerging market central banks. When you look at EM positions versus DM central banks, there’s quite a lot of room still for EM central banks to position closer to where their DM counterparts are, and also retail ETF buying.”
She added that with the expectation of GDP being positive, JP Morgan expects that demand for gold from jewelry and the tech sector should also be resilient and could grow over the next 12 months.
Gold prices are trending lower on Thursday afternoon, with spot gold briefly dropping below $3,300 per ounce shortly after 3:20 p.m. EDT, and last trading at $3,308.24 for a loss of 1.67% on the session.
