Gold price soared close to $4800: when the "war risk" retreats, can the fear of recession ignite a second peak in gold?

Notice that the price of gold has risen for the fourth consecutive trading day. Despite expectations in the market that the Middle East war may be coming to an end, traders are betting that the Federal Reserve may need to cut interest rates to support a possible economic downturn. On Wednesday, the price of gold rose by 2.7% at one point, approaching $4,800 per ounce, before narrowing the gains. The Middle East war has disrupted global markets, causing supply disruptions in energy and other commodities, sparking concerns about skyrocketing inflation. These concerns have at times outweighed gold's traditional appeal as a safe haven asset. As of the time of writing, spot gold has risen by 1.9% to $4,758.57 per ounce. Silver has remained relatively stable at $75.08 USD. Platinum has seen a slight increase, while palladium has fallen. The Bloomberg Dollar Spot Index, which measures the dollar's exchange rate against other major currencies, has fallen by 0.2%. Bond traders are currently reducing their bets that central banks will raise interest rates to mitigate the inflation risks caused by the conflict, and are instead focusing on the war's impact on economic growth. Federal Reserve Chairman Powell stated earlier this week that long-term inflation expectations remain stable. Rate cuts are generally favorable for gold, which does not generate interest. Yuxuan Tang, head of rates and FX strategy at J.P. Morgan Private Bank Asia, said, "When the market narrative shifts from inflation to growth risks, the safe haven appeal of gold often reemerges." She added, "We believe that the room for the Fed to raise rates in this cycle is limited," and will focus on the tight labor market instead. Lower rates are positive for gold, which does not pay interest. Investors will seek clues from President Trump's speech to the nation on the ongoing conflict in the Middle East, which is now in its fifth week. According to a White House official, Trump is expected to praise the success of the military actions in Iran during his speech on Wednesday and emphasize that the actions may conclude within two to three weeks. The official disclosed details of the president's speech and indicated that it will present the U.S. as having achieved or surpassed all military objectives. With hopes in the market for a swift end to the war, gold prices are back on the rise. Trump is wavering between indicating that a solution is imminent and escalating military action. Iran has also put forward certain demands to end the fighting, including control over the Strait of Hormuz. Before the outbreak of the war, this key waterway accounted for around one-fifth of global oil and liquefied natural gas shipments. Moreover, retail sales in February exceeded economists' expectations, and ADP Research Institute's estimates on private sector hiring in March also exceeded expectations. Federal Reserve policymakers previously cut interest rates three times last year due to signs of weakness in the labor market, but this weakness has since eased. Despite a recent rebound, gold's nearly 12% decline in March remains its worst performance in a month since October 2008. David Hinds, trading director at Merrion Gold, a dealer in gold bars and coins, said that retail purchases slowed in the initial days of the sharp drop in gold prices in March, as the price did not rise as customers expected given the escalation of the Iran conflict, leaving them confused. "But in the past week or so, things have become very busy again," he said. "Retail buyers are not as affected by high rates as banks, they are more concerned about inflation." Goldman Sachs is one of the banks that maintains a positive view on gold. In a report released on Tuesday, analysts Lina Thomas and Daan Struyven maintained their year-end forecast of $5,400 per ounce, citing ongoing central bank purchases and the prediction that the U.S. will cut interest rates twice more this year.