Gold will fall below $3,900 this year before rallying to $5,300 in 2027 - TD’s Bart Melek

In his latest research note on gold, Bart Melek, Head of Commodity Research at TD Securities, warned investors that he expects gold prices to fall below $3,900 an ounce before finding a bottom in the current bear-market correction.

However, he added that lower gold prices will represent a strategic buying opportunity because the broader bull market is far from over.

Melek said the biggest near-term risk for gold remains oil prices, which he expects will continue to fuel inflationary pressures.

“With the Strait of Hormuz disruption eroding inventories to historically low levels, the key risk is that the oversold crude market could stage a sharp rebound,” he said in the note. “We believe Brent could still move into the $90–110/bbl range, lifting inflation expectations and reinforcing a restrictive policy bias, thereby increasing carry and opportunity costs for gold holders.”

Despite recent peace talks, the conflict in the Middle East is far from over, as Iran and the U.S. have launched retaliatory strikes against one another. Brent crude oil prices are currently trading above $73 a barrel, up more than 1% on the day.

At the same time, spot gold last traded at $4,022.30 an ounce, down 1.6% on the session.

Melek added that even if the peace agreement holds and oil begins flowing freely through the Strait of Hormuz again, it will take time for the market to stabilize and rebuild inventories to meet persistent demand.

“Despite the likelihood that tankers will be able to pass freely through the Strait of Hormuz, the continued erosion of inventories to unsustainably low levels well into October suggests that crude could still move toward $100/bbl territory for a period, up from the current $74/bbl,” he said. “Given gold’s inverse relationship with rising oil prices and a stronger USD, sustainably higher energy prices could spell further downside for the yellow metal in the months ahead. Markets could begin pricing in the possibility of outright fuel shortages across many parts of the world. Even if flows resume today, these constraints are still likely to emerge.”

Melek explained that elevated oil prices are becoming increasingly embedded in the broader economy, meaning the Federal Reserve will have to maintain a restrictive monetary policy, leaving gold vulnerable.

However, even in the face of persistent downside risks, Melek said the market remains well positioned for a strong recovery into 2027, with prices ultimately pushing above $5,300 an ounce.

“The eventual easing of economic and fund flow headwinds associated with the Iran war should provide an upside catalyst for gold. Meanwhile, lower inflation expectations and a Fed policy shift back toward its maximum employment mandate, alongside likely liquidity injections aimed at offsetting the economic damage from the current negative supply shock in energy and other key commodities, should further support the yellow metal in reaching new record highs,” he said. “With US debt likely approaching $40 trillion and deficits continuing to run high, concerns around financial repression and currency debasement may re-emerge.”

Although the Fed is drawing a hard line on inflation for now, Melek said he does not see any Paul Volcker-like figure on the current committee willing to “break the back of inflation.” He added that this environment could drive renewed safe-haven demand for the precious metal.

“The Fed is likely to be led by an FOMC that may be increasingly composed of relatively dovish members by May 2026, who view the 2% inflation target as a guideline rather than a hard constraint that must be met at any cost,” he said. “Some investors and central banks may also be concerned that the Fed could deploy a form of quantitative easing, potentially framed as a liquidity measure, to suppress long-end yields and lower funding costs, where real economic activity is financed. This would imply that US paper may struggle to adequately compensate investors for inflation. Given gold’s ability to track inflation over the long-term, owing to the labor and productive capital required for its production, it may represent a more attractive safe haven than Treasuries.”