Market Overview: Delayed Rate Cuts Are Not Necessarily Negative for Gold

Geopolitical tensions in the Middle East became suddenly tangible last weekend when Israel and the United States launched a military conflict with Iran, setting in motion a spiral of violence whose end is not yet in sight. How did financial markets respond to this new escalation?

No clear market reaction to war-related violence involving Iran

As expected, prices of oil and gas in particular surged sharply. Gold and silver also initially recorded price increases, although the records reached at the end of January were not matched by a long shot. A pullback followed later, which could largely be attributed to the stronger dollar.

The US currency benefited significantly from rising geopolitical tensions. There are several reasons for this. The United States is largely energy independent when it comes to oil and gas and therefore is less vulnerable to possible supply disruptions. In addition, inflation expectations are rising, reducing the likelihood of rapid policy rate cuts.

As a result, the dollar becomes relatively more attractive compared with other currencies. Finally, there is also the expectation that less capital will flow into emerging markets, while capital flows are more likely to move toward liquid US markets. Whether the dollar’s rise will prove sustainable remains to be seen.

Gold price since 1/1/26, in EUR per troy ounce (Source: Holland Gold)

After just over two months in 2026, gold is trading 18% higher in dollars and 19.5% higher in euros. For the first time in a long while, returns are once again higher in dollars than in euros. The same pattern can be seen in silver, which has surrendered a large part of its gains since the late-January peak but still remains up 16.5% in dollars and 18% in euros.

For now, the US Supreme Court ruling on tariffs has had little impact on markets. The highest court ruled that the trade tariffs imposed by President Trump on exporting countries were unlawful. Only the tariffs imposed under US national security legislation (Section 232) remain in force.

This did not prevent Trump from using other legislation to impose a global 10% tariff nonetheless. It remains unclear what this means for existing bilateral tariff agreements and whether the US will have to refund tariffs that have already been collected and paid.

Euro/dollar since February 27 (Source: TradingView)

As mentioned, the conflict in the Middle East and the potential disruption of energy supplies have once again fuelled inflation concerns. This could affect interest rate expectations. Within the US central bank, opinions are already divided on the matter. In the press, there was open disagreement between John Williams of the New York Fed and Jeffrey Schmid of the Kansas City Fed.

Williams supports further rate cuts, while Schmid opposes them because inflation remains above target and the risks of renewed upward pressure have increased again. Kevin Warsh, who will succeed Jerome Powell as Fed Chair in May, faces the task of aligning views within the policy committee.

Silver price since 1/1/26, in EUR per kilogram (Source: Holland Gold)

The likelihood of any move before the leadership transition at the Fed is rather small. According to the CME FedWatch Tool, markets currently assign a 97% probability to unchanged rates at the next monetary policy meeting on March 18. For the meetings on April 29 and even June 17, there is also a broad majority expecting no change. The first realistic chance of a 25 basis point rate cut has therefore shifted to July 29.

Delaying rate cuts does not necessarily have to be negative for gold. The long-term yield (US 10-year Treasury bond) has risen over the past week as a result of the war-related violence. However, inflation expectations have risen even more sharply, causing real interest rates to decline.

Last year marked the first time that gold accounted for a larger share of central bank currency reserves than US government bonds. In 2025, central banks collectively purchased 863 tonnes of gold. That is roughly one-fifth less in volume terms than the year before, but still well above the average of the past 15 years, which stands at 564 tonnes. Moreover, due to higher prices, nominal gold purchases were significantly larger. The average gold price in 2025 was 44% higher than a year earlier, more than offsetting the decline in volume.

Poland was last year’s largest gold buyer with 102 tonnes. For now, the trend continues in 2026. In January, China’s central bank increased its gold reserves for the 16th consecutive month. Not only central banks but also issuers of gold tokens are highly active in the physical market. Tether leads the way here. The issuer of Tether Gold (XAUT) purchased 82 tonnes of gold last year.

The combined market value of physical gold tokens now amounts to more than 6 billion dollars. It is important to note that these products are not a ‘competitor’ to gold, but on the contrary contribute to physical demand.

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On behalf of Holland Gold, Paul Buitink and Yael Potjer interview various economists and macroeconomic experts. The aim of the podcast is to give viewers better insight and guidance in an increasingly fast-changing macroeconomic and monetary landscape. Click here to subscribe.