How high does gold need to rise to be considered excessive? JPMorgan's expectation: above $8,000

Caixin reported on Monday that after the epic plunge in gold prices last Friday, JPMorgan Chase still maintains a bullish stance, raising its end-2026 gold price forecast from previously $5,400 per ounce to $6,300 per ounce, citing sustained and growing demand from central banks and investors.

In this market headwind, JPMorgan also posed an interesting question in its bullish research report: How high does the gold price need to go to be considered too high?

JPMorgan wrote in the report, “As gold prices approach $5,500 per ounce, more and more investors are asking us: How high can gold prices go? Our medium-term macro analysis framework for gold is based on demand measured in tons — because short-term supply is inelastic, a surge in demand will push prices higher until market equilibrium is restored.”

JPMorgan pointed out that, assuming no change in fundamental buying intent and allocation demand (i.e., nominal inflows/demand remains unchanged), this demand-supply balance will eventually be restored when gold prices rise sufficiently high — at which point the same sustained nominal demand impulse will translate into a demand in tons low enough to eliminate the previous market imbalance that pushed prices higher.

A key answer from JPMorgan: before investors and central banks’ “appetite” slows down, gold prices might need to exceed $8,000 per ounce to be considered too high.

Moving from theory to practice, JPMorgan based its price forecast on a regression analysis between “quarterly central bank and investor gold demand in tons” (which it considers the demand variable that determines gold prices) and “quarterly gold price changes” (see below).

This analysis shows that to push gold prices higher in a given quarter, demand from these channels must exceed 380 tons.

For stress testing, JPMorgan conducted a longer-term regression analysis using data since 2010, which yielded a very similar equilibrium point of around 376 tons.

Therefore, to redefine the above question, one way to think about it is: what gold price level would reduce short-term quarterly nominal demand to below 380 tons?

As mentioned in JPMorgan’s report, in the past two quarters, demand from investors and central banks averaged slightly above $100 billion. If we assume this nominal demand level remains unchanged, then gold prices would need to rise to about $8,400 per ounce to bring demand in tons below the 380 tons historically needed to sustain price increases.

JPMorgan summarized: “Although this is only a limited heuristic analysis that does not consider other demand sectors (such as jewelry) or supply channels (such as recycling/scrap sales), nor the full shift in investor and central bank sentiment towards gold (which is also crucial), we believe this is enough to illustrate: despite rising prices and increasing pressure on the rally, we are not yet close to a critical point where a structural bull market would collapse under its own weight.”