Middle East conflict is posing a considerable upside risk – Commerzbank

In the wake of the developments in the Middle East, the Gold price has recently risen significantly and recovered its losses from the end of September/beginning of October. Strategists at Commerzbank analyze the yellow metal’s outlook.

A renewed steep increase in Oil would be likely if the military dispute in the Middle East were to escalate or widen

The Middle East conflict is currently posing a considerable upside risk. If it were to spill over into other countries in the region, the Gold price would presumably gain initially in its role as a safe haven.

If the military dispute in the Middle East were to escalate or widen, a renewed steep increase in the Oil price would be likely, which in turn would raise the risk of persistently high inflation and could then spark further rate hikes. As interest rates have already been increased noticeably, they would probably not rise as steeply as they did last year. All the same, this would certainly postpone any expectations of any interest rate cuts next year, which is what has lent support to the Gold price of late.

Source: Commerzbank Research