Gold Market Sees Brief Respite as US-Iran Diplomatic Tensions Ease

Gold Steadies as Diplomacy Hopes Ease Inflation Risks

Gold prices steadied on Thursday, as traders assessed the prospects for diplomacy to end the war in the Middle East and ease inflation risks. Bullion was near $4,800 an ounce, having fallen 1.1% in the previous session. The US and Iran are considering a two-week ceasefire extension to allow more time to negotiate a peace deal, according to a person familiar with the matter, even as shipping through the Strait of Hormuz remains choked by a double blockade.

The two sides have an "in principle agreement" to pursue further diplomacy after an inconclusive initial round of talks in Pakistan at the weekend, as reported by the Associated Press. US President Donald Trump played down the prospect of renewed fighting on Tuesday, stating that the near seven-week war is "close to over."

Oil was steady, while US stocks closed at record highs on Wednesday and a gauge of the dollar edged lower. Softer crude prices in recent days have eased concerns about inflation, which had made central banks more likely to hold interest rates steady for longer, or even hike them – a headwind for non-yielding bullion.

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Gold has fallen about 9% since the start of the war, with a liquidity squeeze in the early weeks of fighting leading investors to offload holdings and cover losses elsewhere. Tensions around Hormuz remain high, with the US blockading Iranian shipments and Tehran keeping the critical waterway closed to most other traffic.

Spot gold edged up 0.1% to $4,797.81 an ounce as of 6:18 a.m. Singapore time, while silver rose 0.4% to $79.24. The Bloomberg Dollar Spot Index ended the previous session down 0.1%.