Gold Prices Surge Amid US-Iran Tensions and Dimming Expectations of US Federal Reserve Rate Cut

Gold Prices Surge as Hopes of US-Iran Peace Deal Boost Market

The gold price on the Multi Commodity Exchange (MCX) saw a significant uptick on Thursday morning, driven by investors' anticipation of further clarity on the potential US-Iran peace deal. Additionally, stronger US private payrolls data reduced the prospects of US Federal Reserve rate cuts in the near future, limiting the gains for the yellow metal.

As of 9:05 am, MCX gold June futures were up 0.39% at ₹1,52,730 per 10 grams, while MCX silver July futures were up more than 1% at ₹2,55,929 per kg. The prospects of a peace deal between the US and Iran, which could lead to the reopening of the Strait of Hormuz, a critical waterway for global oil trade, provided a significant relief for gold traders.

The recent decline in crude oil prices, with Brent Crude crashing 8% to trade near $102 per barrel on Wednesday, has alleviated inflation fears, increasing the prospects of a rate reduction and triggering a fresh buying interest in gold. As a result, gold prices rose, driven by hopes for a US-Iran agreement that triggered a sharp decline in oil prices and helped ease inflation worries.

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According to Jigar Trivedi, Senior Research Analyst at IndusInd Securities, MCX gold June futures may advance to ₹1,52,800 per 10 grams as momentum has turned positive in the global market. However, markets are factoring out a rate reduction this year as the US jobs market remains in good shape and concerns over sticky inflation persist.

The ADP's national employment report on Wednesday showed that US private payrolls rose by more than expected in April. The monthly U.S. employment report is due on Friday and will provide a clearer picture of the U.S. job market amid geopolitical uncertainties.

On the geopolitical front, according to media reports, Washington had sent a one-page memorandum of understanding to Tehran through Pakistani mediators to settle the conflict and for the gradual reopening of the Strait of Hormuz. Reuters reported that Iran said on Wednesday it is reviewing a US peace proposal, with key issues remaining unresolved, including the US demand that Iran stop its nuclear program and reopen the Strait of Hormuz.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Following the fall in crude oil prices, the US dollar also eased, making bullion cheaper for buyers in overseas currencies. According to Manoj Kumar Jain of Prithvifinmart Commodity Research, gold has support at $4,634 and $4,580 while resistance is at $4,740 and $4,800 per troy ounce. Silver has support at $75.50 and $72.40, while resistance is at $80 and 82.40 per troy ounce in today's session.