WisdomTree's strategist pointed out that his scenario analysis shows that the upward risks for gold prices are more significant, and any declines under the current environment may be limited.
As the USA and China announced a 90-day pause on some tariffs, Gold's appeal as a safe haven quickly diminished. However, a market strategist anticipates that even if the trade dispute is ultimately resolved, this precious metal will still retain its allure in the context of significant geopolitical and economic uncertainty in the Global financial markets.
WisdomTree's head of European CSI Commodity Equity Index and macroeconomic research, Nitesh Shah, stated in an interview with Kitco News that aside from global trade uncertainty, he believes the next major risk the economy faces is the USA's monetary policy and the Federal Reserve's independence.
Federal Reserve Chairman Powell has faced frequent criticism from Trump for his monetary policy stance. So far this year, the Federal Reserve has maintained a Neutral policy, hesitating to cut rates despite stable inflation risks.
Last week, after the Federal Reserve reiterated that it was in no rush to ease monetary policy, Trump called Powell a 'fool'. Despite ongoing conflicts, Trump stated he did not plan to fire Powell, whose term will end in May 2026.
Shah stated that if Trump looks for a replacement for Powell and if investors begin to question the independence of the Federal Reserve, Gold may perform well. He pointed out that as the Trump administration continues to pressure the Federal Reserve to cut rates, the market may start to lose confidence in the Federal Reserve.
He said, 'If the independence of the Federal Reserve starts to be questioned, its institutional strength could be weakened. Gold could surge significantly because it is the opposite of fiat currency, which may be manipulated by central banks. In times of significant geopolitical and monetary policy uncertainty, demand for hard assets like Gold increases.'
Although Gold's trading price is still significantly below last month's historic high of $3,500 per ounce, Shah stated that he expects Gold to find new support and reach new price highs; it’s only a matter of time.
In his updated price forecasts, Shah's model shows a baseline prediction of $3,610 per ounce for the first quarter of 2026. However, he added that given the numerous uncertainties in the financial markets, the risks are tilted to the upside.
According to his optimistic model predictions, Shah expects that by the first quarter of 2026, the price of Gold will reach $4,000 per ounce.
In his latest report, he wrote: "We certainly believe that with the rise of recession and inflation risks, speculative demand for Gold should remain high. Gold rose from $1,000 per ounce to $2,000 per ounce over 14 years, while it only took a little over a year to rise from $2,000 per ounce to $3,000 per ounce. Imagine an increase of another $1,000 per ounce on the current price, bringing it to $4,000 per ounce, which is not unrealistic."
Aside from the independence of the Federal Reserve, Shah stated that the USA faces significant credibility issues. He pointed out that even if the global trade war is resolved, the USA's reputation as a reliable trading partner has been damaged.
In his latest report, Shah also outlined another very significant optimistic scenario for Gold, namely the US government attempting to implement what experts refer to as the "Mar-a-Lago Agreement". An economic report released last November depicted a scenario where the dollar's status as the world's reserve currency remains unchallenged, thus maintaining global economic stability while being undervalued to support domestic manufacturing and the economy.
Shah pointed out that the last time the US government weakened the dollar to reduce the trade deficit was in 1985, when the Plaza Accord was signed. He noted that between 1985 and 1987, the dollar depreciated by 48%.
Shah stated in the report: "In the scenario of the 'Mar-a-Lago Agreement', we expect the dollar to devalue by 20%. The increase in inflation will exceed our expectations in the optimistic scenario. For this scenario, we eliminated explicit assumptions about bond yields, as we believe yields may fluctuate significantly. Although the intended effect of this policy move is to lower the US debt financing costs (thus policymakers hope to see yields decline), the Debt Refinancing could raise concerns about US credibility and potentially drive bond yields up."
Although Shah continues to be Bullish on the upside potential of Gold, he also acknowledges that there are some downside risks. However, he noted that in the current environment, the magnitude of any price declines may be limited.
In his pessimistic scenario, Sha expects the price of Gold to drop to $2,700 per ounce.
He said: "Based solely on my scenario analysis, more scenarios highlight upside price risks, even in scenarios where prices fall, the decline won't be too large. Due to various uncertainties, I believe that investors are somewhat protected on the downside. Gold, as a strategic asset, remains in demand."
