Gold Price Surges as Rate Hike Expectations Fizzle

The gold price rose significantly over the past week, driven by fading expectations of imminent interest-rate hikes in the United States and easing inflation concerns.

Geopolitical developments surrounding Iran and the Strait of Hormuz remain a double-edged influence: de-escalation could lower oil prices and therefore inflationary pressure, while at the same time reducing demand for gold as a safe haven.

For gold, no single geopolitical factor is decisive. What matters more is the interplay between real interest rates, the U.S. dollar, inflation expectations and risk appetite. A weaker U.S. dollar can support the gold price because the precious metal becomes relatively less expensive for buyers outside the dollar area.