Gold prices have been boosted by recent expectations of interest rate reductions from the US Federal Reserve.
Commerzbank AG has revised upwards their forecast for the gold price in 2025-2026.
Market participants are certain that US Fed is going to cut rates this week at their meeting.
Another weak batch of US labor market data at the start of the month raised hopes of an even larger reduction of 50 basis point.
Forecasts for gold prices
Carsten Fritsch said that the Fed is expected to reduce interest rates 75 basis points this year, and another 125 next year, to 2.5%.
The Fed Funds Futures currently price in this amount is slightly higher.
According to the German bank, gold will average $3.600 an ounce at the end of this year.
By the year 2026, gold is expected to average $3.800 an ounce.
Commerzbank has raised its forecast by $200 per ounce.
Early September saw gold prices continue their upward trend, with new records being set almost every day, even on Mondays and Tuesdays, having surpassed the record from April.
On Tuesday, the COMEX reached a new record for December gold contracts. The contract’s current high is 3,735 dollars per ounce.
The gold price has risen by over 40% in the past year. This trend is not limited to the US dollar, but can be observed with other currencies as well.
Fritsch said:
Recently, gold reached an all-time record in euros at over EUR 3,100 for a troy ounce. Gold is also priced in other currencies, such as British pounds, Swiss Francs, and Japanese yens.
Gold price on the rise
Gold’s price increase can be traced to several reasons, but primarily due to the tariff policies of US President Donald Trump that created uncertainty in early 2018.
Gold deliveries increased significantly to the US in anticipation of an impending US tariff, leading to scarcity in other markets.
Fritsch says that the US President Trump’s unprecedented attack on independence of US Federal Reserve was the trigger for recent price increases.
Trump has publicly and frequently criticized Fed Chairman Powell, for refusing to accede to his demand for a lower interest rate.
The ongoing conflict recently erupted when Trump attempted to fire a Fed Governor. A court decision is pending.
JDVance, vice president of the United States, has also called for a greater participation by elected officials in decisions about monetary policy.
The value of gold
Fritsch said that “a monetary policy controlled by the government increases the risk of inflation over the long term, just look at Turkey or the US back in the 70s.”
In recent months, this has led to a visible deterioration in the US dollar’s reputation.
Gold ETFs have seen significant increases in their value as investors increasingly turn to it as a store of wealth and a place for safety.
According to World Gold Council, gold holdings increased by 470 tonnes since the beginning of this year. They reached a record high for three years in August.
In the eight first months of this year, seven outflows and one minor inflow were observed.
Bloomberg has seen a notable increase in gold ETF inflows.
Silver to rise
Silver will follow the recent trend of gold and experience positive growth.
Fritsch stated that this is likely due to investors looking for alternatives because of the high price of gold.
The strong flows into ETFs that hold silver can attest to this.
By the end of the year, we expect silver prices to be higher than originally expected.
Commerzbank expects the price of silver to be $41 an ounce at the end this year and $43 by 2026.
Recently, silver prices at COMEX broke the 43-dollar mark per ounce. This is a new level.
The gold/silver rate is now hovering at 86. This is close to its low of the year, which was recorded early in September.
Silver has risen by nearly half since the start of this year. It is outperforming gold.
The post Commerzbank raises gold forecasts based on Fed rate cuts; silver will continue to rise may be updated as new developments unfold.
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