Commerzbank has revised its year-end gold price target to $4,800 per ounce, down from an initial forecast of $5,000, citing inflation pressures from the ongoing war in Iran and a shift in U.S. Federal Reserve interest rate expectations. Carsten Fritsch, commodity analyst at the German bank, explained that gold has fallen despite rising consumer prices and Middle East chaos, as market participants now expect the Fed to raise rates later this year rather than cut them. The bank also lowered its silver forecast to $80 per ounce for year-end, reflecting weaker industrial demand alongside tighter supply conditions.
Commerzbank Revises Year-End Gold Target to $4,800 Per Ounce
Commerzbank adjusted its gold price forecast to around $4,800 an ounce by year-end, down from its previous target of $5,000. Fritsch stated that the updated outlook implies upside potential from current levels, as spot gold was last trading at $4,483.95 an ounce, up 1.11% on the day. The revised target suggests an 8% rally from current prices by year-end.
The bank maintained its 2027 gold price forecast at $5,200 per troy ounce. Fritsch noted that structural factors supporting gold remain intact, including eroding confidence in the U.S. dollar as a reserve currency and high government debt levels leading to loose monetary policy.
Fed Rate Hike Expectations Shift Market Dynamics
Fritsch explained that market expectations around U.S. monetary policy have shifted dramatically since the Iran conflict began. Before the start of the Iran war, market participants had expected the Fed to cut interest rates by around 50 basis points this year. Since the start of the war and the resulting rise in oil prices, Fed Funds futures currently imply a U.S. key interest rate of around 3.8% at the end of the year, compared to an effective Fed rate of just over 3.6%.
According to the CME FedWatch Tool, markets see more than a 50% chance of a rate hike in December. A 25-basis-point rate hike is fully priced in by spring 2027. Fritsch stated that the threat of rising interest rates is increasing the opportunity cost of holding gold, a non-yielding asset.
Commerzbank's economists forecast that rates will remain unchanged this year and that the next move is still likely to be a cut. However, Fritsch said the next rate cut is not expected until at least the second quarter of 2027. The bank's base-case scenario envisages a two-month transition period, followed by the reopening of the Strait of Hormuz and a decline in Brent oil prices, which should reverse the current expectations of interest rate hikes.
Silver Forecast Lowered to $80 Per Ounce on Weaker Industrial Demand
Commerzbank expects silver prices to end the year at around $80 an ounce, down from its previous forecast. Fritsch cited the lowered gold price forecast and weaker industrial demand for silver as factors pointing to a slightly lower silver price. According to the latest assessment by the Silver Institute, industrial demand is set to decline for the second consecutive year, falling to a four-year low.
Fritsch noted that the silver market remains tight, which is why the bank expects the silver price to rise in the coming year. Commerzbank projects silver prices to end 2027 at around $90 an ounce, down from its previous target of $95 an ounce.
FAQ
What is Commerzbank's revised year-end gold price target?
Commerzbank has revised its year-end gold price target to $4,800 per ounce, down from an initial forecast of $5,000, citing inflation pressures from the Iran war and a shift in Federal Reserve interest rate expectations.
Why has gold fallen despite inflation and Middle East tensions?
Carsten Fritsch explained that market expectations around U.S. monetary policy have shifted dramatically since the Iran conflict began, with Fed Funds futures now implying rate hikes rather than cuts, increasing the opportunity cost of holding gold as a non-yielding asset.
What is Commerzbank's silver price forecast for year-end?
Commerzbank expects silver prices to end the year at around $80 an ounce, reflecting weaker industrial demand alongside tighter supply conditions, according to Carsten Fritsch.
