Gold: Ceasefire rally driven by yields and rates – Commerzbank

Commerzbank’s Carsten Fritsch reports that Gold jumped up to 3% to USD 4,855 per ounce after the 14‑day Middle East ceasefire, behaving unlike a classic safe haven. The move is linked to lower Oil prices, reduced inflation risks and softer rate expectations, which have pushed bond yields down. The outlook hinges on whether a lasting peace deal emerges.

Yield-driven surge after Middle East truce

"The gold price reacted to the news of a 14-day ceasefire in the Middle East with a jump of up to 3% to USD 4,855 per troy ounce. This means that gold is not behaving like a typical safe-haven asset, also in times of de-escalation."

"Instead, the sharp fall in oil prices is leading to a easing of inflation risks and, consequently, a downward adjustment in interest rate expectations. In Europe, this is likely to mean fewer interest rate hikes, whilst in the US it could mean earlier rate cuts."

"This prospect has led to a fall in bond yields, from which gold, as a non-interest-bearing investment, benefits. Whether this remains the case depends on whether a lasting peace settlement is found in the coming two weeks or whether there is a renewed escalation thereafter."

"The Chinese central bank, PBoC, increased its gold reserves in March for the 17th consecutive month. According to the PBoC’s release, gold holdings stood at 74.38 million ounces at the end of March, an increase of 160,000 ounces compared with the previous month."

"However, compared with the decline in the Turkish central bank’s gold reserves of around 120 tons in the second half of March – 69 tons alone in the last week of March – these amounts are almost negligible."

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