Commerzbank downgrades gold and silver prices as Middle East conflict takes its toll

On Tuesday, commodity analysts at Commerzbank led by Thu Lan Nguyen downgraded their gold price forecast for the second time in as many months. The German bank now expects gold prices to end the year around $4,500 an ounce, down from its revised June forecast of $4,800.

At the same time, Commerzbank also lowered its year-end silver price target to $67 an ounce from its previous estimate of $80 an ounce.

In the report, Nguyen said the price downgrade reflects the fact that persistent inflation pressures continue to force the Federal Reserve to maintain a tightening bias. However, she added that market expectations have become too aggressive, giving gold prices some room to recover from their current lows by the end of the year.

She added that gold still has a path to $5,000 an ounce in 2027 if inflation pressures moderate. However, she said the biggest factor remains the uncertainty surrounding the war with Iran, saying that the ongoing conflict in the Middle East continues to overshadow all the bullish factors that drove gold prices to record highs at the start of the year.

“This is partly because the US, as an energy exporter, benefits from the current energy crisis – as evidenced by the sharp rise in its oil exports in recent months. The risk premiums in the foreign exchange market are sending a similar signal: After Liberation Day – i.e. the introduction of extensive US tariffs by the US government – hedging against a depreciation of the dollar relative to the euro became significantly more expensive (as reflected in positive EUR-USD risk reversals, see figure below). Since the outbreak of the Iran war, however, the dollar has again been regarded as safer than the euro. As long as this remains the case, gold is unlikely to benefit disproportionately from increased demand for safe havens,” she said.

Despite the heightened geopolitical uncertainty, Commerzbank said there is little evidence that the conflict is having a lasting impact on the U.S. economy. Nguyen pointed out that although near-term inflation pressures have increased, long-term inflation expectations remain anchored. She said that in this environment, it is unlikely the Federal Reserve will adopt a sufficiently aggressive monetary policy stance to alter gold's longer-term bullish outlook.

“There is potential for the gold price to recover from its current level, as we consider current market expectations of Fed rate hikes to be excessive and anticipate that Fed interest rates will remain unchanged until the end of the year. The Fed is likely to raise interest rates only if inflation trends force them to do so,” she said. “Our economists’ base-case scenario, in which core inflation does not rise significantly above the assumed monthly rates consistent with the target in the coming months, remains unchanged. In this scenario, the Fed would likely refrain from raising interest rates and might even cut its key interest rate from mid-2027 onwards, as the 2% target would then be reached in spring 2027.”

Nguyen explained that although gold’s months-long correction has damaged market sentiment, there are still significant long-term drivers supporting higher prices.

Nguyen said the bank's long-term bullish outlook remains intact because the structural drivers that fueled gold's rally earlier this year have not disappeared. She noted that growing skepticism toward the U.S. dollar as a traditional safe-haven asset, driven by unpredictable U.S. policy, continues to support demand for bullion.

At the same time, the freezing of Russia's foreign exchange reserves has prompted many central banks to reassess the security of their reserve assets, accelerating diversification into gold.

Finally, mounting government debt across advanced economies has raised concerns about the long-term safety of sovereign bonds, further enhancing gold's appeal as an asset that is institutionally independent and carries no default risk.