Gold: Commerzbank says Fed outlook underpins medium-term price levels

Gold Strengthens as Geopolitical Tensions Ease

According to Thu Lan Nguyen of Commerzbank, gold prices have rebounded following President Trump's indication that the conflict with Iran may soon conclude. This development has alleviated concerns about aggressive interest rate hikes. The bank suggests that, given the current weakness in the US job market and ongoing political pressure on the Federal Reserve, central banks are unlikely to respond forcefully to short-term inflation risks caused by energy price fluctuations. As a result, gold is expected to maintain its strength in the medium term.

Impact of War, Interest Rates, and Safe-Haven Appeal

Gold has regained momentum after President Trump hinted at a resolution to the Iran conflict. This recovery is largely attributed to a reduction in expectations for higher interest rates, which had previously increased due to worries about inflation from rising energy costs. Since the onset of the conflict, the likelihood of a Federal Reserve rate cut by year-end has diminished.

Commerzbank believes that earlier market expectations for rate changes were overly optimistic. While central banks have learned from the inflation surge following the 2022 energy price shock, they are not expected to react more swiftly to inflation threats this time around.

The Federal Reserve, facing significant political calls to lower interest rates, is likely to proceed cautiously. For these reasons, the outlook for gold remains positive over the coming months.

(This report was produced with assistance from artificial intelligence and subsequently reviewed by an editor.)