Gold: De-escalation seen lifting prices into year-end – Commerzbank

Commerzbank analyst Norman Liebke notes that Gold and Silver have dropped as renewed US strikes in the Gulf reinforced the inverse link with Oil. Higher energy prices raise inflation and rate fears, weighing on non-yielding metals. However, he expects de-escalation to support both Gold and Silver, with prices projected to recover by the end of the year.

Inverse oil link and de-escalation upside

"The price of gold fell by nearly 2% following the latest US military strikes in the Persian Gulf. Silver followed this trend almost exactly. As has been the case in recent weeks, the inverse relationship between the price of gold (or silver) and the price of oil continues to hold (at least roughly)."

"If there are new risks of escalation in the Iran conflict, the gold price tends to fall, as higher energy prices increase the risk of higher inflation and, consequently, rising interest rates. Since gold does not pay interest, the yellow metal becomes less attractive. On the other hand, any de-escalation generally has a positive effect on the gold price, which is why we expect the gold price to rise again by the end of the year."

"At the same time, the price of silver moves almost in parallel with the price of gold; the gold-to-silver ratio has remained between 60 and 65 since the end of January — when the risk of escalation increased significantly — and has barely moved at all in the last two weeks."

"We also expect corresponding upside potential for the price of silver in the event of de-escalation. However: Even if the war were to end immediately, it would likely take some time for the situation to normalize."

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