Gold Prices Remain Steady Amid Weakening Prospects for US-Iran Conflict and Reduced Likelihood of Central Bank Rate Hikes

Global Markets

Gold Prices Remain Stable Amid Easing Middle East Conflict Tensions

Gold prices remained relatively unchanged in early trading, as optimism over efforts to end the Middle East conflict eased bets on interest-rate hikes. Bullion was near $4,540 an ounce, following a 1.4% gain in the previous session. The dollar and Treasury yields retreated on Wednesday, lifting gold as it's priced in the US currency and pays no interest.

A potential end to the war and the reopening of the Strait of Hormuz would ease inflation concerns driven by elevated energy prices, reducing expectations that global central banks will keep interest rates higher for longer. This would be positive for non-yielding bullion, which typically performs well in a lower-rate environment.

Comparison of Gold Prices

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The minutes of the Federal Reserve's latest policy meeting showed a majority of officials warned the US central bank would likely need to consider raising rates if inflation continued to run persistently above their target. Gold has traded in a narrow range since falling sharply in the early days of the Middle East conflict, as investors weigh higher rates against the prospect of a high-inflation, low-growth scenario, which they argue should benefit gold.

Bullion is down about 14% since the war began in late February. Spot gold was down 0.1% at $4,540.78 an ounce as of 6:34 a.m. in Singapore. Silver fell 0.5% to $75.56 an ounce. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed after ending the previous session down 0.3%.