PRECIOUS METALS | Geopolitical Tensions Impact Gold Prices, Analyst Says

Gold prices have experienced significant volatility recently due to geopolitical tensions, according to Jin10. Ren Fei, a fund manager at China Europe Fund, analyzed that the core drivers of gold prices can be divided into long-term and short-term factors. Long-term influences include the U.S. fiscal deficit rate and the underlying government debt scale and credit level, while short-term factors are primarily affected by the degree of monetary policy easing. Following the outbreak of the U.S.-Israel-Iran conflict, gold prices have declined. Ren Fei noted that the conflict has significantly increased international oil prices, causing inflation expectations, which were initially declining, to rise again. This has led to fluctuating market concerns, with some even anticipating that the U.S. Federal Reserve might resume interest rate hikes in 2026. Such expectations have directly constrained the space for monetary policy easing, thereby impacting gold prices. Despite the short-term adjustments, Ren Fei remains optimistic about the long-term outlook for gold. He cites two main reasons: First, the U.S.-Israel-Iran conflict is likely to evolve into a prolonged stalemate, eventually returning to negotiation and bargaining. During this process, the U.S. debt pressure is expected to accumulate further, and its monetary credit will continue to be under pressure. Second, in terms of policy choices between raising and lowering interest rates, the U.S. is unlikely to shift towards rate hikes. To alleviate government debt interest payment pressure and support sectors like AI, monetary policy needs to remain accommodative, with even the possibility of rate cuts, making it difficult for the monetary environment to tighten substantially.