Rate reductions in the second half of the year are expected to push gold prices up to $5,000 and silver to $90, according to Commerzbank

Gold Market Rebounds Amid Ongoing Oil Price Surge

Last week, gold prices experienced a notable turnaround, maintaining crucial support at their 200-day moving average and breaking a three-week streak of losses, even as oil prices continued their upward trajectory.

The positive momentum carried into Monday, further strengthening gold's optimistic outlook. According to one investment bank, the lackluster performance of gold throughout March is unlikely to persist.

Analysts from Commerzbank remain confident in gold's prospects, despite the significant decline in prices over the past two months. On Friday, the German financial institution raised its forecasts for precious metals.

Commerzbank now anticipates gold will close the year at approximately $5,000 per ounce, an increase from their previous December projection of $4,900. The bank also expects the upward trend to continue into 2027, predicting gold will reach $5,200 per ounce by the end of next year.

Thu Lan Nguyen, who leads FX and Commodity Research at Commerzbank, noted in a recent report that she expects the conflict in Iran to conclude before summer, which could prompt markets to rapidly adjust their expectations for interest rate cuts.

One factor weighing on gold has been the ongoing conflict in Iran, which has disrupted global energy supply chains and driven oil prices higher. This surge in energy costs has fueled inflation concerns, leading markets to believe the Federal Reserve will maintain its current monetary policy stance.

Higher interest rates have made holding gold less attractive by increasing the opportunity cost.

Nguyen stated, “We anticipate the US Federal Reserve will resume cutting rates by the end of this year, reducing its benchmark rate by a total of 75 basis points by mid-next year. Meanwhile, US inflation is expected to remain above target levels in the coming year. In summary, real interest rates in the US are likely to decline over time, making gold a more appealing investment.”

While rising bond yields and a strengthening US dollar have posed challenges for gold, Nguyen emphasized that gold’s reputation as a safe-haven asset remains intact.

She explained that the unique circumstances of the current crisis have limited gold’s appeal as a safe haven, but this does not diminish its significance as a key monetary asset in global markets.

“It’s important to differentiate between types of crises,” Nguyen said. “Gold prices tend to climb during periods when economic risks are at the forefront, such as during the global financial crisis or the COVID-19 pandemic, when central banks are expected to implement expansionary policies like rate cuts. In the present situation, however, the focus is on inflation shocks, leading to expectations of rate hikes. This also helps explain why the Swiss franc, another traditional safe haven, has recently underperformed among G10 currencies.”

Silver Outlook Remains Positive

Commerzbank is also optimistic about silver, which has faced similar challenges as gold. The bank projects silver prices will reach $90 per ounce by the end of the year and rise to $95 by the close of 2027.

Nguyen added, “Key fundamentals, such as a tight market, continue to support the case for higher silver prices.”