Gold Prices Stabilize Amid Progress on Iran Nuclear Deal, Easing Inflation Fears
Global Markets React to Signs of Progress in US-Iran Talks
The price of gold held gains on Monday, buoyed by signs that the US and Iran were making progress on reaching a deal to reopen the Strait of Hormuz and restore oil flows, easing inflation fears. Bullion was trading around $4,560 an ounce, after rising 1.4% the day before.
US President Donald Trump's comments on Monday that talks with Iran over an interim deal to extend their ceasefire and ease restrictions on passage through the crucial waterway were "proceeding nicely" contributed to the uptick in gold prices. Traders are, however, monitoring for potential strikes that may derail talks, as Iran has demanded the cessation of hostilities in Lebanon be part of any peace agreement. Local media has reported explosions in the Strait of Hormuz, along a Tehran-approved transit route used by vessels crossing the waterway. Separately, Israel said it will intensify strikes against Hezbollah while the US-Iran talks are ongoing.
The conflict in the Middle East has had a significant impact on gold prices, with bullion slumping around 13% since it erupted in late February. The war sent energy prices soaring and fanned inflation concerns, prompting traders to ramp up rate-hike bets. Higher borrowing costs weigh on bullion, which doesn't pay interest.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
According to John Reade, chief strategist at the producer-funded World Gold Council, a sustained rebound in gold "requires breaking away from the correlation with risk assets." He added that gold has a better chance of recovering toward the end of the year, even if the conflict ends now, as it takes time for energy balance to be restored.
The current gold prices are as follows:
| Asset | Price Change | Price |
|---|---|---|
| Gold | -0.2% | $4,561.16 |
| Silver | -0.5% | $77.69 |
The Bloomberg Dollar Spot Index, a gauge of the US currency, was stable after retreating 0.3% the day before.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Investor Takeaway
Gold prices may stabilize due to progress on the Iran nuclear deal, easing inflation fears.
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