Gold prices may be facing many short-term challenges as the USD strengthens and the expectation of monetary policy to remain cautious affects investor sentiment. However, according to a Canadian bank, the overall macroeconomic context continues to support the precious metal in the long term.
Talking to Kitco News, Mr. Bart Melek - Head of Commodity Strategy at TD Securities - said that although geopolitical tensions will usually support gold prices, the market is currently heavily influenced by bond yield developments and expectations that central banks will maintain tight monetary policy for a longer time.
Ultimately, the decisive factor is still interest rates," he said, adding that the fact that gold prices have not increased sharply in the context of increasing geopolitical risks shows that the precious metal is becoming more sensitive to real yield developments.
According to Mr. Melek, although gold is often seen as a defensive asset against price fluctuations, this factor itself is not enough to push gold prices up. More importantly, the correlation between gold and alternative assets, especially US Treasury bonds.
People often talk about this factor, that's true, but not enough" - he said - "More important is the relative value compared to other assets, especially US Treasury bonds".
One factor that is significantly impacting this relationship is the diễn biến of oil prices.
According to Mr. Melek, the strong increase in oil prices due to tensions in the Middle East is making the monetary policy outlook of the US Federal Reserve (Fed) more complicated. TD Securities estimates that every time oil prices increase by 10%, the overall price increase can increase by about 0.2 percentage points.
In the context that oil prices have increased by about 60%, if this trend persists, the impact on the monetary policy environment may become more significant.
According to Mr. Melek, when energy costs increase for a long time, the possibility of the Fed adjusting policy towards easing will be more limited. This may cause financial conditions to remain cautious for a longer time and affect capital flows in the commodity market.
However, he believes that the current energy shock is likely only temporary. If the geopolitical situation is more stable and supply disruptions do not last long, oil prices may adjust to the 90-95 USD/barrel range.
In that scenario, central banks will have more room to adjust policies in a more flexible direction, thereby supporting gold's outlook through a lower real yield environment and a weaker USD.
TD Securities currently maintains its forecast that the average gold price will be around 4,831 USD/ounce in 2026, with the possibility of peaking at nearly 5,000 USD/ounce in the second quarter, before adjusting to around 4,650 USD/ounce by the end of the year.
