Gold Stabilizes Amid Conflicting Positions from Washington and Tehran on Ending the War

SadaNews - The price of gold stabilized after a slight recovery that lasted two days, as traders assessed the conflicting statements issued by the United States and Iran regarding negotiations to end the war in the Middle East.

The price of the precious metal stabilized near $4,500 an ounce after recording gains exceeding 2% during the previous two sessions.

The White House confirmed that talks with Iran are ongoing and has prepared a 15-point peace plan, while Tehran has publicly rejected American initiatives to end the conflict and presented its own conditions.

Despite Washington's diplomatic efforts, it ordered the deployment of thousands of soldiers in the region, heightening fears of a perilous ground invasion.

Since the outbreak of the war about a month ago, gold has declined by about 15%, largely moving in parallel with stocks and inversely with oil.

The rise in energy prices has increased inflation risks, prompting investors to bet that central banks will keep interest rates unchanged or will raise them, which is pressuring gold that does not yield returns.

Interest Rate Pressures and Recession Risks

The likelihood of an interest rate hike by the Federal Reserve may decrease due to the risks of an economic slowdown in the U.S. resulting from the prolonged continuation of the war.

Wall Street institutions are lowering their expectations for the U.S. economy this year while raising their estimates for inflation and unemployment and increasing the odds of recession.

Analysts at "Standard Chartered," including Sudakshina Unnikrishnan, wrote in a note: "Investment positions are likely to remain inflated and susceptible to risks in the near term."

About 85 tons of gold holdings in exchange-traded funds have been withdrawn since the start of the war, according to Bloomberg calculations. Even at the level of $4,500 an ounce, there are still an additional 83 tons of holdings that have incurred losses, making them vulnerable to liquidation, according to analysts at "Standard Chartered." This amounts to about $12 billion based on the gold closing price on Wednesday.

Spot gold rose by 0.1% to $4,511.95 an ounce at 1:10 PM Singapore time. Silver also increased by 0.2% to $71.32, and both platinum and palladium recorded slight gains as well. The Bloomberg Dollar Spot Index remained unchanged.