HSBC strategists: Gold's recent pullback presents greater value; the medium- to long-term outlook for gold remains bullish.
2026-04-03 12:29:55
Despite gold's recent relative weakness, its value as a portfolio diversification tool has become more important than ever as correlations between different assets continue to rise. HSBC commodity strategists Willem Sels and Lucia Ku believe the medium- to long-term outlook for gold remains bullish.
Sells and Ku reiterated their constructive outlook on gold over the next six months and said HSBC will continue to maintain its overweight position in gold.
They noted, "Inflation concerns have also led to significant interest rate volatility and prompted the market to repric its expectations for monetary policy. Policymakers are likely to maintain current interest rate levels for some time before gradually implementing easing measures. We will continue to seek high-quality yields from investment-grade credit and emerging market local currency bonds to achieve stable income growth."
They emphasized, "However, with increasing cross-asset correlations, we are actively leveraging gold and other alternative assets to enhance portfolio diversification. Despite the recent pullback, we remain optimistic about gold's medium- to long-term prospects, primarily due to its excellent diversification advantages and continued safe-haven demand. "
The two analysts added that they believe the recent pressure on gold will be short-lived, as its fundamentals remain strong .
They wrote, "Gold continues to play a vital role as a highly attractive portfolio diversification tool against the backdrop of ongoing geopolitical uncertainty and continued central bank purchases."
HSBC has maintained its positive outlook throughout the recent pullback in gold prices. On March 30, analysts at HSBC Asset Management stated that gold's performance in 2026 resembles that of a risk asset, experiencing significant selling pressure amid escalating geopolitical tensions and a stronger dollar, but the global trend of de-dollarization still makes it a sound long-term investment.
Analysts wrote: "Since the outbreak of the conflict in Iran, the price of gold has deviated significantly from traditional market expectations. Conventional trading logic holds that geopolitical tensions and economic uncertainty will naturally drive up gold prices, just like the 'Liberation Day' event last year, which led to a massive two-year rally."
However, they pointed out that gold's performance this year has been quite the opposite, with a cumulative decline of about 15% so far in March.
Analysts stated, "A stronger dollar undoubtedly constitutes a major headwind, hindering entry for non-US buyers, while the market's hawkish repricing of interest rates has significantly increased the opportunity cost of holding non-yielding assets." They added, "However, gold experienced similar pressure from a stronger dollar and sharp rises in interest rates in 2022, which somewhat undermines the persuasiveness of conventional theories."
HSBC believes that gold is actually exhibiting more characteristics of a risk asset in 2026. They point out: "The ownership structure of gold has clearly shifted towards retail investors and other leveraged buyers who are often forced to liquidate their positions during periods of market stress."
Analysts emphasize: "Nevertheless, gold still possesses a solid long-term investment rationale , especially against the backdrop of the ongoing global trend of de-dollarization. However, the recent sharp fluctuations also serve as a wake-up call: to achieve robust portfolio diversification, a more comprehensive and diversified approach must be adopted."
On February 15, HSBC’s chief precious metals analyst, James Steel, said that the precious metals market will be dominated by volatility in 2026, as the direction of Federal Reserve policy and the strength of the US dollar will continue to profoundly shape market demand.
He was asked why gold did not seem to react significantly to the rapid decline in the yield on the 10-year U.S. Treasury note, which fell sharply from 4.30% to 4.00% in just a few days.
He replied, “You’ve hit the nail on the head. This change happened in 2022. Before that, if you look at the 10-year real interest rate (the 10-year yield minus the inflation rate), there was a very stable inverse correlation between it and the price of gold, a relationship that can be traced back to the end of the Bretton Woods system and the decoupling of gold from the dollar.”
Steele stated that this relationship has completely broken down in recent years. He said, "Gold is far less sensitive to real interest rates, especially the 10-year real interest rate, than it used to be. This coincides with a period of significant retail buying, a marked increase in geopolitical risks, and continued gold purchases by central banks around the world."
He added, "I'm not saying the relationship will never be restored, but it's certainly not as strong as it used to be."
Steele continued, “There’s a lot of talk in the market about gold hitting new highs. I personally prefer to look at gold in terms of its intrinsic value, that is, its inflation-adjusted price. In today’s monetary terms, that’s roughly equivalent to $3,400, and we broke through that level in April. Gold has hit a series of new highs, and its failure to continue rising significantly recently doesn’t necessarily mean the bull market is over.”
He said, "Don't forget, we've already seen a lot of new money flowing into the market, and there was a parabolic rise in January. When a market rises so rapidly in this way, it's bound to trigger significant volatility. I think 'volatility' will be the key word for the gold market this year."
James Steel concluded by emphasizing, "Just because gold is a safe-haven asset and a high-quality asset does not mean that it will not experience significant volatility."
In conclusion , although gold exhibited more risk asset characteristics and experienced a significant pullback in 2026, HSBC strategists believe that its value as a portfolio diversification tool has significantly increased as cross-asset correlations have risen. Its long-term fundamentals remain solid, particularly supported by geopolitical uncertainty and the trend towards de-dollarization.
Investors should recognize that volatility in the gold market will become the norm, and a more comprehensive diversification strategy is needed when constructing portfolios to better cope with the complex and ever-changing macroeconomic environment.
Spot gold daily chart source: EasyForex
Spot gold closed at $4675.99 per ounce on April 2.
HSBC maintains its overweight position, with a constructive outlook for the next six months.
Sells and Ku reiterated their constructive outlook on gold over the next six months and said HSBC will continue to maintain its overweight position in gold.
They noted, "Inflation concerns have also led to significant interest rate volatility and prompted the market to repric its expectations for monetary policy. Policymakers are likely to maintain current interest rate levels for some time before gradually implementing easing measures. We will continue to seek high-quality yields from investment-grade credit and emerging market local currency bonds to achieve stable income growth."
They emphasized, "However, with increasing cross-asset correlations, we are actively leveraging gold and other alternative assets to enhance portfolio diversification. Despite the recent pullback, we remain optimistic about gold's medium- to long-term prospects, primarily due to its excellent diversification advantages and continued safe-haven demand. "
The two analysts added that they believe the recent pressure on gold will be short-lived, as its fundamentals remain strong .
They wrote, "Gold continues to play a vital role as a highly attractive portfolio diversification tool against the backdrop of ongoing geopolitical uncertainty and continued central bank purchases."
Gold's performance in 2026 may resemble that of a risk asset, but its long-term fundamentals remain solid.
HSBC has maintained its positive outlook throughout the recent pullback in gold prices. On March 30, analysts at HSBC Asset Management stated that gold's performance in 2026 resembles that of a risk asset, experiencing significant selling pressure amid escalating geopolitical tensions and a stronger dollar, but the global trend of de-dollarization still makes it a sound long-term investment.
Analysts wrote: "Since the outbreak of the conflict in Iran, the price of gold has deviated significantly from traditional market expectations. Conventional trading logic holds that geopolitical tensions and economic uncertainty will naturally drive up gold prices, just like the 'Liberation Day' event last year, which led to a massive two-year rally."
However, they pointed out that gold's performance this year has been quite the opposite, with a cumulative decline of about 15% so far in March.
Analysts stated, "A stronger dollar undoubtedly constitutes a major headwind, hindering entry for non-US buyers, while the market's hawkish repricing of interest rates has significantly increased the opportunity cost of holding non-yielding assets." They added, "However, gold experienced similar pressure from a stronger dollar and sharp rises in interest rates in 2022, which somewhat undermines the persuasiveness of conventional theories."
HSBC believes that gold is actually exhibiting more characteristics of a risk asset in 2026. They point out: "The ownership structure of gold has clearly shifted towards retail investors and other leveraged buyers who are often forced to liquidate their positions during periods of market stress."
Analysts emphasize: "Nevertheless, gold still possesses a solid long-term investment rationale , especially against the backdrop of the ongoing global trend of de-dollarization. However, the recent sharp fluctuations also serve as a wake-up call: to achieve robust portfolio diversification, a more comprehensive and diversified approach must be adopted."
Volatility will be the main theme of the precious metals market in 2026.
On February 15, HSBC’s chief precious metals analyst, James Steel, said that the precious metals market will be dominated by volatility in 2026, as the direction of Federal Reserve policy and the strength of the US dollar will continue to profoundly shape market demand.
He was asked why gold did not seem to react significantly to the rapid decline in the yield on the 10-year U.S. Treasury note, which fell sharply from 4.30% to 4.00% in just a few days.
He replied, “You’ve hit the nail on the head. This change happened in 2022. Before that, if you look at the 10-year real interest rate (the 10-year yield minus the inflation rate), there was a very stable inverse correlation between it and the price of gold, a relationship that can be traced back to the end of the Bretton Woods system and the decoupling of gold from the dollar.”
Steele stated that this relationship has completely broken down in recent years. He said, "Gold is far less sensitive to real interest rates, especially the 10-year real interest rate, than it used to be. This coincides with a period of significant retail buying, a marked increase in geopolitical risks, and continued gold purchases by central banks around the world."
He added, "I'm not saying the relationship will never be restored, but it's certainly not as strong as it used to be."
Steele continued, “There’s a lot of talk in the market about gold hitting new highs. I personally prefer to look at gold in terms of its intrinsic value, that is, its inflation-adjusted price. In today’s monetary terms, that’s roughly equivalent to $3,400, and we broke through that level in April. Gold has hit a series of new highs, and its failure to continue rising significantly recently doesn’t necessarily mean the bull market is over.”
He said, "Don't forget, we've already seen a lot of new money flowing into the market, and there was a parabolic rise in January. When a market rises so rapidly in this way, it's bound to trigger significant volatility. I think 'volatility' will be the key word for the gold market this year."
James Steel concluded by emphasizing, "Just because gold is a safe-haven asset and a high-quality asset does not mean that it will not experience significant volatility."
In conclusion , although gold exhibited more risk asset characteristics and experienced a significant pullback in 2026, HSBC strategists believe that its value as a portfolio diversification tool has significantly increased as cross-asset correlations have risen. Its long-term fundamentals remain solid, particularly supported by geopolitical uncertainty and the trend towards de-dollarization.
Investors should recognize that volatility in the gold market will become the norm, and a more comprehensive diversification strategy is needed when constructing portfolios to better cope with the complex and ever-changing macroeconomic environment.
Spot gold daily chart source: EasyForex
Spot gold closed at $4675.99 per ounce on April 2.
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