Gold Prices Stuck as Rate Hike Odds Rise, Deutsche Bank Sees $4,700 Target
Gold's price has been stuck in a tight range over the past few weeks, trading between $4,040 and $4,135 per ounce. This comes as the market adjusts to the de-escalation of tensions with Iran, which had been putting upward pressure on gold prices due to its safe-haven appeal.
The catalyst for this week's price action was President Trump's announcement that he would be calling off planned strikes against Iran and opening negotiations instead. However, unlike other asset classes, such as oil and the S&P 500, which dropped significantly in response, gold barely budged.
This is because the market has been pricing in a rate hike from the Federal Reserve, with a 64.5% probability of a hike at the September meeting. This has led to higher real yields, which have historically capped bullion prices. In fact, ten-year real yields have climbed towards 2.08%, a level that has previously limited gold's gains.
In contrast, Deutsche Bank is still bullish on gold, maintaining its fair value model at $4,700 per ounce and suggesting that the metal remains in an 'explosive phase' of price behavior.