Gold’s Decline Amid Discord: ING’s Perspective on Future Prices
Ewa Manthey, Commodities Strategist at ING, has noted a significant decline in gold prices of approximately 12% since the onset of the ongoing conflict in Iran, despite gold’s traditional standing as a safe-haven asset. Manthey attributes this decrease to larger macroeconomic factors, including rising oil prices, a stronger US Dollar, and heightened real yields. Nevertheless, ING maintains an optimistic outlook on gold, forecasting a price of $5,000 per ounce by the end of the year, buoyed by central bank demand and increasing flows into exchange-traded funds (ETFs).
Macro Challenges Overwhelm Safe-Haven Status
Manthey elaborates on the dynamics affecting gold’s appeal, stating, "Gold’s safe-haven characteristics are usually most pronounced during financial crises or economic shocks, scenarios that foster falling real yields and a weakening dollar. In contrast, a supply-driven energy shock, such as the current situation, exerts the opposite pressure." She explains that rising oil prices can exacerbate inflation, compel central banks to maintain interest rates, and strengthen the dollar—factors that collectively diminish gold’s attractiveness.
Adding to this complexity, the Federal Reserve opted to leave interest rates unchanged in April, with Chair Jerome Powell adopting a cautious stance. The resurgence of inflation since the conflict began has weakened the case for imminent monetary easing. Although ING’s economist forecasts potential easing in the latter half of the year, persistent energy shocks could further delay these actions.
The immediate response from the gold market to geopolitical tensions has also been notable, particularly following President Trump’s dismissal of Iran’s recent peace proposal, branding it as "totally unacceptable." This development has led to renewed uncertainty regarding a ceasefire timeline and elevated inflation risks, bolstering the argument for a prolonged period of high interest rates, which has negatively impacted gold prices throughout the conflict.
Future Outlook
Despite these challenges, Manthey expresses a constructive view on gold’s trajectory, although the stagnation of peace negotiations introduces immediate uncertainties. Trump’s rejection of Iran’s proposals keeps the potential for a ceasefire ambiguous, which in turn amplifies inflationary pressures and constrains the Federal Reserve’s ability to lower rates.
Looking ahead, ING anticipates a rise in gold prices, projecting them to reach $5,000 per ounce by year-end. However, Manthey emphasises that the foremost downside risk lies in the potential for a breakdown in peace talks, which could sustain high energy prices and compel the Federal Reserve to maintain its current policy stance through the year’s end.
(This article has been generated with the assistance of an AI tool and reviewed by an editor.)
