Gold prices firm as optimism grows over US-Iran nuclear deal prospects
Gold Prices Surge as Iran Conflict Optimism Boosts Market
Gold prices drifted higher on Friday, marking a weekly gain, as optimism over a potential end to the Iran conflict eased concerns about inflation and elevated interest rates. The precious metal added 0.7% to $4,719.68 per ounce by 1745 GMT, with a weekly gain of 2.3%.
U.S. gold futures settled 0.4% higher at $4,730.70. Gold, typically seen as a safe haven during periods of global turmoil, faces pressure in a higher-interest-rate environment due to its non-yielding nature.
The market's expectations for a potential de-escalation in the Iran conflict have driven gold prices upward. As energy prices decline, the prospects for a U.S. Federal Reserve rate cut increase, which has contributed to the rebound in gold prices.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
The United States expected an Iranian response as soon as later on Friday to its latest proposal to end the war in the Gulf, even as U.S. and Iranian forces traded fire in the region. Oil prices and the U.S. dollar index were set for weekly declines, which has made dollar-priced gold less expensive for other currency holders and eased concerns about inflation.
According to the CME FedWatch tool, the market sees a 14% chance of a U.S. rate hike this year, down from around 22% the previous day. This shift in market expectations has contributed to the surge in gold prices.
| Market Indicator | Previous Day | Current Day |
|---|---|---|
| U.S. Rate Hike Chance | 22% | 14% |
| Oil Prices | - | Set for weekly decline |
| U.S. Dollar Index | - | Set for weekly decline |
Data showed U.S. employment increased more than expected in April, which briefly extended gains in gold prices. However, gold demand in India was muted this week, as a price recovery prompted potential buyers to postpone purchases, while China premiums remained steady on safe-haven demand.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Spot silver rose 2.5% to $80.4 an ounce and platinum gained 1.3% to $2,047.88, both headed for weekly gains. Palladium fell 0.5% at $1,487.71.
Investor Takeaway
Investors should be cautious of potential market fluctuations due to the ongoing Iran conflict and its impact on global energy prices.
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