Gold Prices Stabilize Amid Uncertainty Over US-Iran Diplomatic Developments

Global Markets Remain Volatile Amid Ongoing Conflict in Middle East

Gold prices held a decline on Tuesday as conflicting signals from the US and Iran cast doubt over a diplomatic resolution to the war, fueling concerns over inflation and prolonged trade disruptions. Bullion was trading near $4,490 an ounce, having fallen more than 1% in the previous session.

The uncertainty surrounding the conflict, which has now entered its fourth month, has had a significant impact on global markets. On Monday, oil clocked its biggest gain in about a month, while bond yields and the dollar climbed, making gold priced in the US currency more expensive. Brent crude held just under $95 a barrel on Tuesday, having fallen last week on optimism that a deal might be reached.

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The conflict has triggered a global energy crisis, and any resumption of energy and trade traffic through the Strait of Hormuz would ease concerns around global inflation, making it more likely that central banks will loosen monetary policy. Lower borrowing costs are a tailwind for gold, which doesn't pay interest.

However, the Federal Reserve may have less reason to cut rates to stimulate consumption after US manufacturing activity expanded in May at the fastest pace in four years – the fifth straight month of growth, according to data released on Monday. The outlook for gold "remains contingent on developments in the Middle East," according to Rhona O'Connell, head of market analysis for EMEA and Asia at StoneX Financial Ltd.

Spot gold edged up 0.1% to $4,489.20 an ounce as of 8:40 a.m. in Singapore. Silver gained 0.4% to $75.12 an ounce. Platinum and palladium also rose. The Bloomberg Dollar Spot Index was flat, having ended the previous session up 0.3%.