Environment remains favorable for Gold – Commerzbank

In addition to tensions between the US and China, dovish comments from the Fed also supported the Gold price this week, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

Gold gains on Fed dovish tilt and renewed US–China tensions

"In a speech on Wednesday, Fed Chair Jay Powell pointed to the increased risks for the labor market and signaled that these were causing the Fed greater concern than inflation, which remains above target. This assessment was also confirmed by Powell's FOMC colleagues, New York Fed President John Williams and Fed Governor Christopher Waller. "

"Meanwhile, the newest FOMC member, close Trump ally Stephen Miran, once again advocated an interest rate cut of 50 basis points. He also confirmed that two further interest rate cuts this year would be realistic, which is largely in line with market expectations. Since the end of last week, however, interest rate expectations for next year have also fallen."

"Based on the Fed Funds Future for the end of 2026, the market expects interest rates to be around 20 basis points lower, which would mean that slightly more than five steps (at 25 basis points each) would be priced in from current levels. The reason for this is likely to have been the renewed conflict between the US and China, which poses a threat to the economies. Most recently, concerns about some regional banks in the US have also been added to the mix."