Gold Prices Rise, Approaching $4760 Per Ounce

SadaNews - Gold rose slightly after a two-day decline, with improved optimism regarding the possibility of reaching a negotiated solution to the war between the United States and Iran, easing inflation fears.

The precious metal was close to $4760 per ounce, recovering part of the 0.6% loss incurred during the previous two sessions.

Despite the United States initiating a maritime blockade of the Strait of Hormuz, President Donald Trump stated that Iranian officials contacted his administration expressing a desire "to reach an agreement." Separately, Iranian President Masoud Bezazkian said that Tehran is prepared to continue peace talks within the framework of international law.

Oil Decline Supports Gold and Stocks

Oil fell below $100 per barrel, while stocks rose on Monday and a dollar index dropped by 0.2%, supporting gold priced in U.S. dollars.

The decline in energy prices has alleviated some of the inflationary pressures that have affected gold since the outbreak of the war over six weeks ago, prompting traders to bet that central banks will keep interest rates stable for a longer period or even raise them, which exerts pressure on non-yielding commodities.

However, concerns remain about additional shocks to energy supplies and economic damages, especially with escalating pressure on Iran through the U.S. blockade of the Strait of Hormuz.

The U.S. Navy is moving to cut vessels' passage in this strategic route to and from Iranian ports and coastal regions. As tensions persist, U.S. financial markets continue to price in a probability of less than 20% for the Federal Reserve to cut interest rates by December.

Gold Moves According to Rate Expectations

Justin Lin, an investment strategist at Global X ETFs Australia, said that "gold is still reacting based on interest rate expectations, not as a geopolitical hedge, and therefore benefits, along with stocks, from hopes of de-escalation overnight."

He added that although inflation fears are pressuring gold in the short term, a sustained rise in oil prices may eventually lead to slower growth, which is historically "positive" for gold.

Despite a moderate recovery in recent weeks, gold remains down about 10% since the conflict began in late February. A liquidity crisis in the early days of fighting led investors to sell their gold holdings to cover losses elsewhere.

The spot gold price rose by 0.5% to $4764.30 per ounce as of 8:15 AM Singapore time. Silver also increased by 0.2% to $75.73 per ounce, with both platinum and palladium rising as well. The Bloomberg Dollar Spot Index, measuring the performance of the U.S. dollar, fell by 0.1%.