Gold Caught in the Crossfire—Geopolitics Provides Support, While Inflation and Interest Rates Act as Brakes

Gold remains an important anchor of stability in a market environment marked by uncertainty. Geopolitical tensions and persistently high demand from central banks support the long-term investment case, while potential inflationary pressures and delayed interest rate cuts could create headwinds in the short term. Following the strong performance of recent months, volatility has increased, making larger price fluctuations more likely. Overall, the long-term outlook remains positive, even though investors must expect a more challenging market environment in the short term.

Gold continues to trade at elevated levels, but is currently exhibiting significantly higher volatility. This is driven in particular by the escalation in the Middle East, which has led to sharper downward price fluctuations in the short term.

Macroeconomic Tensions: Geopolitics vs. Interest Rate Outlook

At the same time, a more complex macroeconomic environment is emerging: The conflict increases the risk of rising energy prices and, consequently, renewed inflationary pressure. This could limit or delay central banks’ scope for further interest rate cuts, which would generally weigh on gold. As a result, the precious metal is currently caught between geopolitical support and potentially higher real interest rates.

Structural Demand Remains Intact – Central Banks as a Stabilizing Factor

However, structural demand remains intact. Central banks continue to buy gold to diversify their reserves, and during periods of heightened uncertainty, demand for safe-haven assets rises further. Supply, on the other hand, responds only to a limited extent, which can amplify price movements.

Overall, market positioning has become more dynamic without yet being overheated, leaving room for further movements in both directions.

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Mimi Haas, Lic. rer.pol. HSG, M.A. in Banking and Finance HSG, Partner

_{Sources: Degussa, Reuters, and the Financial Times.
As of June 22, 2025}