The recent rise in expectations for interest rate cuts by the US Federal Reserve has provided a significant boost to gold prices.
This has led Commerzbank AG to revise upwards its forecast for gold prices in 2025 and 2026.
The market is certain that the US Fed will cut interest rates at its meeting this week.
At the beginning of the month, another weak set of US labour market data raised hope of a larger cut of 50 basis points.
Gold price forecasts
“We expect the Fed to cut interest rates by 75 basis points by the end of the year and by a further 125 basis points next year to 2.5%,” Carsten Fritsch, commodity analyst at Commerzbank AG, said on Tuesday.
This is slightly more than the Fed Funds Futures are currently pricing in.
The German bank now sees gold prices averaging $3,600 per ounce by the end of the year.
It also sees gold averaging $3,800 per ounce by the end of 2026.
This is $200 per ounce higher than Commerzbank’s previous forecast.
Gold prices continued their upward trend in early September, consistently reaching new record highs almost daily, including Monday and Tuesday, after exceeding the previous record set in April.
The current record high for the December gold contract on COMEX is $3,735 per ounce, touched on Tuesday.
Gold prices have surged over 40% since the start of the year, a trend observed across various currencies, not solely against the US dollar.
Fritsch said:
Gold also recently reached a new all-time high in euro terms, at more than EUR 3,100 per troy ounce. The same applies to the price of gold in other currencies such as the British pound, the Swiss franc, and the Japanese yen.
Why gold price is on a golden run
The gold price surge can be attributed to several factors, primarily the uncertainty early in the year stemming from the US President Donald Trump’s tariff policy.
The prospect of a US tariff on gold imports led to a significant increase in gold deliveries to the US, resulting in a scarcity of the precious metal in other trading centres.
The trigger for the recent price increase was US President Trump’s unprecedented attack on the independence of the US Federal Reserve, according to Fritsch.
Trump has frequently and publicly criticised Fed Chairman Powell for not acceding to his demands for lower interest rates.
This ongoing dispute recently escalated when Trump moved to dismiss a Fed governor, a decision now awaiting a court ruling.
Concurrently, Vice President JD Vance has advocated for greater involvement of elected officials in monetary policy decisions.
Gold’s value
“A monetary policy influenced by the government would increase longer-term inflation risks, as a look at Turkey today or back at the US in the 1970s shows,” Fritsch noted.
As a result, the reputation of the US dollar has been visibly undermined in recent months.
Investors are increasingly turning to gold as a safe haven and store of value, as evidenced by significant inflows into gold ETFs.
Source: Commerzbank Research
Gold holdings have surged by 470 tons since the start of the year, reaching a three-year high in August, according to World Gold Council data.
Over the first eight months of the year, inflows were recorded in seven, with only one month experiencing minor outflows.
Gold ETFs tracked by Bloomberg have experienced a noticeable increase in inflows since late August.
Silver to rise
Silver is expected to follow gold’s recent upward trajectory and also experience a positive trend.
“This is probably also due to the fact that the already high gold price is deterring some investors, who are therefore looking for cheaper alternatives,” Fritsch said.
This can be seen in the strong inflows into silver ETFs.
We therefore expect the price of silver to rise strongly than previously assumed by the end of next year.
Commerzbank now sees silver prices trading at $41 per ounce by the end of this year, and $43 an ounce by the end of 2026.
Silver prices on COMEX breached the $43 per ounce recently, a level not seen since 2011.
Source: Commerzbank Research
After Friday’s decline, the gold/silver ratio is hovering around 86, close to the year’s low recorded in early September.
Since the beginning of the year, silver has gained nearly 50%, outperforming even gold.
The post Commerzbank lifts gold forecasts on Fed rate cut hopes; silver to continue rising appeared first on Invezz
