Gold’s 19% rebound hinges on war’s end — but the Fed holds the real key

Gold futures have rebounded 18.53% from their annual low of $4,100 per troy ounce to $4,859.7, driven not by inflation fears or monetary stimulus, but by the prospect of peace. Silver climbed further — 31.84% — from $61.21 to $80.70. The catalyst: growing expectations that the U.S. and Iran may finalize an end to their war after recent ceasefire talks. When the conflict erupted, oil prices surged and rate cut bets faded, dragging gold down. Now, with behind-the-scenes negotiations accelerating toward a second round, the dollar has weakened and oil prices have fallen, reducing the opportunity cost of holding non-yielding assets. Geopolitical de-escalation is lifting precious metals — but only temporarily, unless the Federal Reserve shifts course. A month ago, futures priced in a 60.9% chance of a rate cut this year. Today, that probability stands at 33.8%. Higher rates make gold less attractive. Even if war ends and stagflation fears ease, the path ahead depends on liquidity. Kevin Wash, a Fed chairman candidate, supports lower rates but opposes quantitative easing. Without renewed asset purchases, the demand for gold as an inflation hedge may remain muted. The rally is real. The momentum is fragile. Gold may not return to its August 2020 highs — no matter how quiet the battlefield becomes.