Analyst: Easing geopolitical risks benefit gold, but the key lies in the return of rate cut expectations

Golden Ten Data reported on April 1 that gold prices edged up on Wednesday, reaching a near two-week high, mainly supported by a weaker US dollar. Marex analyst Edward Meir stated that talk of the US possibly ending the war within two to three weeks, even if the Strait of Hormuz does not reopen, boosted US equities and contributed to the rally in gold prices. However, if inflation expectations rebound, interest rates could rise further, which would also limit gold’s upside. The market has almost entirely priced out the possibility of a Federal Reserve rate cut this year, whereas, before the outbreak of the war, it had expected two rate cuts in 2024. OCBC strategist Christopher Wong noted that if geopolitical tensions ease further, market expectations for the Federal Reserve to loosen monetary policy may return. In this scenario, real yields could decline, providing support for gold prices.