Gold May Perform Well Amid Trump Admin and Fed Clash Over Interest Rates - Commerzbank

The gold market faces selling pressure from U.S. bond yields hitting two-decade highs, driven by inflation expectations and likely Federal Reserve rate hikes. Yet the metal remains resilient with underlying support. Thu Lan Nguyen at Commerzbank points to a 90% probability of a rate hike this week, as Middle East tensions lift oil prices and broader rate forecasts. Spot gold trades near $4,295 an ounce with little change.

This resilience likely reflects hedging against a looming clash between the Fed and Trump administration. President Trump has pushed for lower rates and launched probes into monetary policy members. Rate cut bets reversed after the U.S. and Israel conflict with Iran disrupted energy supplies and boosted inflation. "Faced with persistently elevated inflation, the Federal Reserve is increasingly under pressure to raise interest rates, while President Trump has threatened extreme measures should the Fed fail to cut rates. As a result, a confrontation appears almost inevitable," Nguyen said.

Commerzbank now sees gold ending the year around $4,500 an ounce, down from its prior $4,800 forecast. The long-term bullish view holds due to growing doubts over the dollar amid unpredictable U.S. policies and concerns about sovereign debt in advanced economies, enhancing gold's appeal as a default-free, independent asset.