Why does the stronger the ceasefire signal, the more gold rises?

Ask AI · Why does gold benefit from interest rate expectations when conflicts ease?

China Securities Journal, April 1 — (Li Ziman) According to traditional analysis frameworks, when geopolitical conflicts ease or remain deadlocked, safe-haven demand declines, and gold should face pressure, but the reality is quite the opposite.

According to CCTV News on April 1, local time March 31, U.S. President Trump stated that the U.S. will end its war with Iran within two to three weeks, and said this move will help lower current high energy prices.

Wind data shows that on April 1, spot gold continued to rise, breaking through the $4,700 mark during the session. As of the time of writing, the day’s maximum increase exceeded 1%.

“Gold now fears high interest rates more than war.” Li Gang, Director of Research at the China Foreign Exchange Investment Research Institute, explained the logical shift behind this.

He pointed out that the current market focus has shifted from safe-haven attributes to interest rate attributes. As concern over conflicts cools, oil prices fall back, and inflation expectations decrease accordingly, this creates space for the Federal Reserve’s future policy shifts. The market is beginning to price in rate cut expectations early, and gold is highly sensitive to real interest rates. Once rate expectations decline, its valuation pressure is significantly alleviated.

“In other words, when geopolitical conflicts escalate, gold rises due to safe-haven demand, but rising oil prices push up inflation, making it difficult for central banks to cut rates. High interest rates then suppress gold; whereas, when conflicts ease, oil prices fall, inflation pressures decrease, and markets anticipate rate cuts, leading to lower funding costs, increased liquidity, and a more lasting positive effect on gold,” Li Gang said.

Wang Hongying, President of the Hong Kong Financial Derivatives Investment Research Institute, told China Securities Journal that the pricing anchor for gold is gradually shifting from short-term safe-haven demand to a game of assessing the Federal Reserve’s medium- to long-term rate cut expectations.

In Wang Hongying’s view, as geopolitical military conflicts ease, oil prices stagnate and face technical correction pressures, indicating that overall inflation may ease in the future, prompting global central banks to refocus on the Fed’s interest rate policy direction. Despite short-term disturbances, the market generally believes the Fed will return to a rate-cutting cycle. Even if gold prices undergo temporary corrections, major central banks including China’s continue to increase their gold holdings.

Supporting this view are deeper structural factors.

Wang Hongying pointed out that from the Russia-Ukraine conflict to recent U.S.-Israel military strikes on Iran, and even the illegal detention of Venezuela’s legitimate president, these events have heightened concerns among countries about U.S. political and military expansion. From a security perspective, the de-dollarization process will continue. Coupled with the U.S. government’s expanding debt and resulting credit weakening, the medium- to long-term weakening of the dollar remains a high-probability trend. This is also a strategic reason why global institutional investors have recently increased their gold holdings.

Wang Hongying believes that in the short term, gold may still be suppressed by the dollar in the second quarter of this year; in the medium to long term, the basic expectation of Fed rate cuts and dollar weakness remains unchanged, providing underlying support for gold.

The key to future gold trends depends on whether rate cut expectations can be realized. Li Gang believes that first, it is necessary to observe whether U.S. inflation continues to decline. If the CPI and core inflation remain stable over the next 3 to 6 months, it will reinforce rate cut expectations and benefit gold. Second, attention should be paid to U.S. employment data; if the labor market shows further marginal weakening, it will also push policy shifts. Lastly, real interest rates, as the core pricing anchor for gold, tend to enter a trend upward when they decline persistently. But at the same time, vigilance is needed for oil prices or geopolitical situations fluctuating, as these are key variables for short- to medium-term gold price volatility.

Li Gang predicts that international gold prices will remain oscillating between $4,000 and $5,000 per ounce in the short to medium term, with a breakthrough of $5,500 per ounce not being difficult in the long term.

Wang Hongying stated that attention should be paid to low-probability risks. If the U.S.-Israel-Iran conflict unexpectedly escalates, causing oil prices to spike and inflation expectations to reignite, and if the Fed delays rate cuts or even raises rates slightly, gold may face pressure in the second and third quarters of this year.

(For more news leads, please contact the author Li Ziman: liziman@chinanews.com.cn)(China Securities Journal APP)

The views expressed in this article are for reference only and do not constitute investment advice. Investing involves risks; please proceed with caution.(

Editor: Xue Yufei, Luo Kun