Gold set for another 10% rally? JM Financial’s Rahul Sharma weighs in
In a recent note, Sharma explained, “Technically, prices could extend by another 10% from current levels, but the likelihood of a price or time correction from that point is high.”
The report also highlights that central banks are expected to buy around 900 tonnes of gold in 2025—well above the pre-2022 average of 500–600 tonnes. Key buyers include China, India, Poland, and Turkey.
Sharma highlighted that global reserves now stand at ~36,200 tonnes, or 20% of total reserves, which “acts as a price floor, limiting downside and supporting long-term gains.”
Sharma pointed out that gold ETFs saw 397 tonnes of inflows in the first half of 2025, bringing total holdings to 3,616 tonnes. He added that demand was being driven by geopolitics, U.S. policy risks, and inflation fears, with Chinese ETF holdings up 70% year-to-date. However, he cautioned that if risk appetite improves, ETF outflows could cap gains.
On the policy front, the report underscored that the U.S. Federal Reserve’s stance will be critical. The Fed funds rate currently stands at 4.25–4.50%.“Market expects ~50 bps cuts by end-2025, possibly more in 2026,” Sharma noted. He added that such rate cuts, especially in a recession scenario, “could boost gold by 10–15%,” though a hawkish Fed or sticky inflation could weigh on prices via a stronger dollar.The inflationary backdrop could provide another boost. With U.S. CPI at 2.9% and tariffs or supply shocks potentially pushing it above 5% in the second half of 2025, Sharma said the “stagflationary backdrop favors gold as an inflation and debasement hedge.” He also flagged global growth concerns in China and Europe as additional supportive factors.
On the technical front, Sharma observed that “gold is the most overbought on monthly charts since the 1980’s – RSI above 88 currently.” He pointed out that gold has surged 98.84% in the past 23 months, creating “an extremely overbought situation, which may continue for a while but risk-reward [is] not favourable for fresh investments”
Overall, the JM Financial strategist expects modest gains or range-bound moves in the second half of 2025, followed by stronger upside in 2026 as central bank and investor demand stay solid.
“Overall, the next 12 months favor a bullish bias for gold, with prices potentially testing $4,000 by mid-2026 in a base case,” Sharma said.
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