Gold: Under pressure despite lower real yields – Commerzbank

Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch highlight that Gold has dropped back below USD 4,000 per troy ounce despite easing US rate expectations and lower real yields. They argue that French bond market tensions and the upcoming Fed meeting have not yet translated into safe‑haven demand, and caution that any Fed surprise may only trigger a limited Gold reaction.

Fed meeting and yield dynamics

"The gold price has fallen back below the USD 4,000 per troy ounce mark and thus remains clearly on the back foot. This is somewhat surprising given the recent change in US interest-rate expectations. Despite the sharp rise in oil prices and the associated increase in inflation expectations, US rate expectations have actually eased somewhat."

"As a result, the real interest rate implied by market expectations has even declined at the short end (and remained stable for the long end), which should generally be supportive of gold. At first glance, the persistent tensions in the French bond market also argue in favour of gold. However, the situation looks different from late September."

"Attention now turns to the Fed meeting, which begins today and concludes with Fed Chair Warsh’s press conference tomorrow evening. Market expectations for a Fed rate hike have declined noticeably recently. A rate increase this week is considered very unlikely, while a December hike is no longer fully priced into Fed Funds futures."

"The downward revision to rate expectations means that the bar for a dovish surprise at the Fed meeting has risen, while the bar for a hawkish surprise has fallen. However, the recent decline in the gold price was not triggered by the adjustment in rate expectations. It is therefore by no means certain that the Fed meeting will prompt a significant reaction in gold, provided the surprise remains limited."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)